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

An analyst at a brokerage firm issues a buy recommendation on a listed company after reading only a one-paragraph press release about a new product. She has not reviewed the company's financial statements or industry conditions. Which Standard has she most likely violated?

She most likely violated Standard V(A), Diligence and Reasonable Basis. A recommendation must have a reasonable and adequate basis supported by appropriate research and investigation, and a single press release, without financial statement or industry review, does not meet that requirement.

  1. AStandard V(C): Record Retention
  2. BStandard V(A): Diligence and Reasonable BasisCorrect
  3. CStandard IV(C): Responsibilities of Supervisors

Explanation

Standard V(A) requires a reasonable and adequate basis, supported by appropriate research and investigation, for any recommendation. A press release alone is not such a basis. Record retention and supervision are not the central issue in the facts.

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