CFA Level I · CFA Level I Exam · Guidance for Standard I: Professionalism
A research analyst is asked by her firm's investment banking department to work on evaluating a prospective issuer client. Her manager also suggests that her upcoming report on the issuer should be favorable to help win the mandate. Which response is most consistent with Standard I(B)?
She should collaborate only if conflicts are effectively managed, issue her true unbiased opinion, and disclose conflicts that cannot be avoided. The guidance allows analyst-banker cooperation under managed conflicts, but recommendations must be free of bias from internal pressure; disclosure cannot justify a distorted favorable report.
- ARefuse to collaborate with investment bankers under any circumstances
- BCollaborate only if conflicts are adequately managed, publish her true opinion, and disclose any unavoided conflictCorrect
- CPublish a favorable report but disclose the investment banking relationship
Explanation
Collaboration with investment bankers is appropriate only when conflicts are adequately and effectively managed, and conflicts that are not avoided must be disclosed. Recommendations must convey true opinions free of bias from internal pressure. Disclosure alone (option C) does not permit a biased opinion, and a blanket refusal (A) is not required.
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