CFA Level I · CFA Level I Exam · Guidance for Standard II: Integrity of Capital Markets
An analyst downgrades an automaker after speaking with company representatives, salespeople, labor leaders, in-house currency analysts and bankers. Which action by the analyst is most appropriate to strengthen the claim that the conclusion came solely from appropriate methods?
The analyst should retain and document all supporting research. Evidence of the public and nonmaterial nonpublic information used strengthens the assertion that the conclusion came from appropriate methods rather than material nonpublic information, as in the example where the analyst kept the support material in case questions arose.
- ARetain and document all the supporting research usedCorrect
- BDestroy notes once the report has been issued
- CAsk the company to confirm the conclusion before publication
Explanation
The guidance says analysts should save and document all their research. Evidence of knowledge of public and nonmaterial nonpublic information supports the assertion that conclusions were reached through appropriate methods rather than material nonpublic information. Destroying notes removes that evidence, and asking the company to confirm could elicit material nonpublic information.
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.
More Guidance for Standard II: Integrity of Capital Markets questions
- According to the CFA Institute's view of ethics, society and the capital markets, the phrase "for the ultimate benefit of society" in the CF…
- A buy-side analyst concludes from interviews with retailers, designers and public financial reports that a furniture maker's next-quarter ea…
- 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…
- Which outcome is most likely to result from widespread unethical conduct by market participants, according to the CFA Institute?
- Mei, a buy-side analyst, visits a retailer's stores, talks to its suppliers and reads public filings. A supplier's employee then privately t…
- Under Standard II(B), the intent of a trading action is most likely critical in determining whether a violation has occurred because: