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CFA Level I · CFA Level I Exam · Guidance for Standard VI: Conflicts of Interest

An analyst buys 100,000 penny-stock shares for her own account. A week later, her employer asks her to write a report on penny stocks in the industry, and she believes the stock merits a buy and expects the price to surge once the report is published. The analyst's most appropriate action is to:

She should disclose the conflict to her employer and consider declining the assignment. If she still writes the report, she must disclose the conflict in it. Having an independent buy view does not remove the conflict created by her holding and the expected price surge.

  1. Awrite the report because her buy view is independent of her holding
  2. Bdisclose the conflict to her employer and consider declining the assignmentCorrect
  3. Csell the shares immediately after publication without disclosure

Explanation

She must disclose the conflict to her employer and should consider declining the assignment. If the employer has her write it anyway, she must disclose the conflict in the report. Independent belief does not remove the conflict, and selling after publication without disclosure would profit from the price surge while hiding the interest.

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