CFA Level I · CFA Level I Exam · Guidance for Standard V: Investment Analysis, Recommendations, and Actions
A team of analysts at a brokerage publishes a group research report that downgrades a stock to sell. One team member, Aiko Tan, had earlier told a client the stock was a buy and knows the client purchased shares on that advice. Which action is Tan most likely required to take under the Standards?
Tan should ensure the changed recommendation reaches all current clients, taking particular care with the client who bought on her earlier advice. Material changes must be communicated fairly to all current clients, not selectively or after a needless delay.
- AWait until the report is routinely distributed to all clients at the firm's next scheduled update.
- BEnsure the changed recommendation reaches that client promptly, along with all other current clients.Correct
- CContact only that client, because only that client has acted on the earlier advice.
Explanation
Under Standard III(B), material changes in a prior recommendation must be communicated to all current clients, with particular care that clients known to have acted on the earlier advice are reached. Contacting only one client would be selective disclosure, and simply waiting delays a client who may be affected.
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