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CFA Level I · CFA Level I Exam · Guidance for Standard V: Investment Analysis, Recommendations, and Actions

An analyst on a committee reviews a securitized product for a group recommendation. Which action by the analyst is most consistent with forming a reasonable basis under Standard V(A)?

The most consistent action is considering the quality of the assets in the securitization. The guidance names this as an attribute for forming a reasonable basis, and diligence calls for a balance of resources rather than relying on a single rating or simply following the majority.

  1. ARelying on the issuer's rating alone
  2. BFollowing the majority view of the committee
  3. CConsidering the quality of the assets in the securitizationCorrect

Explanation

The guidance lists the quality of the assets included in a securitization as an attribute to consider. A reasonable basis comes from a balance of resources, not from a single rating or from deferring to the majority.

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