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CFA Level I · CFA Level I Exam · Code of Ethics and Standards of Professional Conduct

An analyst at a brokerage firm owns shares in a company she covers and is about to change her recommendation from hold to sell. She also plans to sell her own holding. Under Standard VI(A), which action is most appropriate?

She should disclose her holding and avoid trading ahead of the recommendation's release, so clients and the employer can see the conflict and her own trade does not gain priority over theirs. Selling first or selling silently does not avoid or disclose the conflict.

  1. ADisclose her holding, and avoid the conflict by not trading ahead of the recommendation's releaseCorrect
  2. BSell her shares first, then issue the recommendation because her shares will no longer be held
  3. CIssue the recommendation, then sell without telling anyone because the trade is small

Explanation

Her ownership is a conflict that should be disclosed, and trading before clients can act on the recommendation would put her interests ahead of theirs. Selling first breaches the duty to clients, and silent selling hides the conflict.

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