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CFA Level I · CFA Level I Exam · Guidance for Standard VI: Conflicts of Interest

A marketing director at a broker/dealer asks a research analyst to publish a favorable recommendation on a company so the firm can win investment banking business from it. The analyst believes the stock is only fairly valued. Which action is most consistent with Standard VI(A)?

The analyst should resolve the conflict or disclose it while keeping the recommendation independent and objective. Issuing a favorable view she does not hold to win banking business impairs objectivity, and disclosure of the pressure does not cure that.

  1. AIssue the favorable recommendation and disclose that marketing requested it
  2. BResolve the situation or disclose it, while keeping the recommendation independent and objectiveCorrect
  3. CIssue the favorable recommendation, since employer interests take priority over personal views

Explanation

The guidance on cross-departmental conflicts says members must resolve such situations or disclose them under VI(A), and the standard is aimed at protecting independence and objectivity. Disclosing while issuing a recommendation the analyst does not believe still impairs objectivity, and employer interests do not override this.

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