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

A research team at an asset manager is finalizing a recommendation. Analyst Tomas Reyes believes the consensus valuation relies on a peer group that is clearly inappropriate and on model inputs that were never checked, so the conclusion lacks a reasonable basis. Which action is most appropriate for Reyes under the Standards?

Reyes should seek to correct the flawed basis and, if the team will not do so, dissociate from the report. The relief from dissociating applies only when the consensus has a reasonable, adequate basis, which he believes is missing here.

  1. ASign the report to preserve team unity and record his disagreement privately.
  2. BAsk that the basis be corrected, and dissociate from the report if it is not.Correct
  3. CRemain on the report because group conclusions bind every member.

Explanation

Members need not dissociate when the consensus has a reasonable and adequate basis, but here Reyes believes it does not. Standard V(A) requires a reasonable and adequate basis supported by appropriate research, so he should press for correction and dissociate if it is not fixed. Staying on the report out of team loyalty is wrong.

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