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

An analyst owns shares of a company that she recommends to clients. The firm considers banning all personal ownership of such securities. According to the guidance for Standard VI(A), a prohibition is most accurately described as:

A ban is the simplest way to prevent the stock-ownership conflict but may be overly burdensome and too restrictive. It is not required; instead members must disclose any beneficial ownership interest in securities they recommend.

  1. Arequired, because ownership always impairs objectivity
  2. Bthe simplest preventive method but possibly overly burdensome and too restrictiveCorrect
  3. Cunnecessary, because beneficial ownership need never be disclosed

Explanation

The guidance says prohibiting ownership is the simplest way to prevent the conflict but may be overly burdensome and too restrictive. Members must disclose any beneficial ownership interest in securities they recommend, so the third option is wrong and the first overstates the requirement.

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