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

An analyst publishes a report on a structured investment product. The report emphasizes the product's upside participation and omits the issuer's credit risk and the limited secondary-market liquidity. Which statement best describes the analyst's conduct under Standard V(B)?

The analyst violated Standard V(B). A report on a structured product must include the factors relevant and important to that investment type, and issuer credit risk and limited liquidity clearly qualify. Omitting only unimportant aspects is allowed, but leaving out key risks stops readers from following and challenging the reasoning.

  1. AAcceptable, because a report writer may omit any aspect that the analyst considers unattractive to clients.
  2. BAcceptable, because follow-up communication is required only for equity research.
  3. CA violation, because factors relevant and important to the investment type were left out of the report.Correct

Explanation

For structured investment products, the report must include factors that are relevant and important to that investment type, such as issuer credit risk and liquidity. Omission is allowed only for aspects deemed unimportant, with limits of scope stated. The first option misstates this, and follow-up communication of significant changes applies generally.

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