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CFA Level I · CFA Level I Exam · Guidance for Standard IV: Duties to Employers

An analyst at Brightwater Securities learns that her employer's compliance manual requires staff to report ownership of stocks they analyze. She owns shares in a company she covers and is unsure what to do. Which action is most appropriate under the Standards?

She should promptly report her holding to her employer. The Standards say ownership of stocks analyzed or recommended must be reported promptly so the employer can assess the impact and decide how to resolve the conflict, and employer policies requiring disclosure must be followed.

  1. ASell the shares at once without telling anyone, since the conflict then disappears.
  2. BKeep the holding private, because personal investments are outside the employment relationship.
  3. CPromptly report the holding to her employer so it can assess the conflict and decide how to resolve it.Correct

Explanation

Guidance on disclosing conflicts to employers states that ownership of stocks analyzed or recommended must be promptly reported so the employer can assess its impact and decide on resolution. She must also follow employer policies. Privately selling or keeping silent denies the employer the information it needs.

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