Skip to content

CFA Level I · CFA Level I Exam · Guidance for Standard II: Integrity of Capital Markets

A well-respected analyst changes a recommendation on a stock from buy to sell, and the change alone moves the share price. The analyst built the view from public information and her own interpretation. Which action is most appropriate under Standard II(A)?

The analyst may release the change to clients. Her conclusion came from public information and her own expertise, and she is not an insider. Even if the market finds it material, she is not required to make her work public; non-clients can do the analysis or become clients.

  1. ADelay the change until the report can be made public to non-clients
  2. BRelease it to clients, since the analyst's work is not inside informationCorrect
  3. CWithdraw the change because the market found it material

Explanation

A well-known analyst's report may be considered material by the market, but the analyst is not a company insider and created the conclusions from public information using expertise. The conclusions need not be made public merely because the public would find them material. Non-clients can do the work themselves or become clients.

Did you get it right without looking?

One question tells you little. A timed set on Guidance for Standard II: Integrity of Capital Markets shows your real accuracy, how long you take and where you lose marks.

Practise Guidance for Standard II: Integrity of Capital MarketsFree diagnostic mock

More Guidance for Standard II: Integrity of Capital Markets questions