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CFA Level I · CFA Level I Exam · Guidance for Standard V: Investment Analysis, Recommendations, and Actions

A portfolio manager at a mid-sized firm uses an equity research feed that her firm's senior managers selected after completing a due diligence review of several vendors. She has no reason to question the vendor or the firm's review process. Under Standard V(A), the manager is most likely:

She may use the feed in good faith. The Standard allows members to rely on colleagues who determined the research was sound, unless there is reason to question its validity or the firm's due diligence process. She need not replicate the vendor's work herself.

  1. Apermitted to use the information in good faith without repeating the vendor selection review herselfCorrect
  2. Brequired to independently replicate the vendor's analysis before using any of its recommendations
  3. Crequired to stop using the feed unless the vendor discloses its models and underlying assumptions

Explanation

Members may rely on others in their firm to determine whether third-party research is sound and may use the information in good faith unless they have reason to question its validity or the processes used. Here the firm's senior managers performed due diligence, so repeating it is not required. Requiring replication or full model disclosure goes beyond the standard.

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