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

An analyst learns that her spouse has inherited a large shareholding in a company the analyst has been asked to cover in a new research report. Under Standard VI(A), the analyst's most appropriate minimum action is to:

The analyst must at minimum disclose the spouse's ownership to her employer and in the report. Best practice would be to ask for the coverage to be reassigned. Silence is not permitted because a beneficial ownership interest in a recommended company is a conflict that must be avoided or disclosed.

  1. Adisclose the beneficial ownership to her employer and in the report.Correct
  2. Bsell the spouse's shares before the report is published.
  3. Csay nothing, because the shares are held by her spouse and not by her.

Explanation

Beneficial ownership in a company being recommended is a conflict that must be avoided or disclosed. In the Fargmon example, the minimum is disclosure to the employer and in the report, and best practice is reassignment. Staying silent is wrong because the interest is a conflict. Forcing a sale is not required.

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