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

A sell-side analyst's firm is pursuing investment banking business with Orion Ltd. The marketing head asks the analyst to initiate a Buy rating on Orion to help win the mandate. The analyst's most appropriate action under Standard VI(A) is to:

The analyst should keep the rating based on independent analysis and resolve the conflict or disclose it under Standard VI(A). A marketing request for a favorable recommendation to win business is a named cross-departmental conflict, and the rating must not be driven by it.

  1. Aissue the Buy rating and disclose the banking relationship.
  2. Bbase the rating on independent analysis and resolve or disclose the pressure as a conflict.Correct
  3. Cdecline to cover Orion and inform only the marketing head.

Explanation

The guidance on cross-departmental conflicts says a marketing division asking for a recommendation to win business creates a conflict that must be resolved or disclosed. Issuing a rating shaped by that request compromises independence, and disclosure alone does not cure it. Telling only the marketing head fails to report the conflict properly to the employer and others affected.

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