CFA Level I · CFA Level I Exam · Equity Analyst Research Reports
An analyst's employer is the lead underwriter for a company's upcoming bond issue. The analyst covers the company's equity and is aware of the relationship. Which action is most appropriate for the analyst when publishing a report on the company?
The analyst should disclose the underwriting relationship and base the recommendation on independent, objective analysis. Disclosure lets readers weigh potential bias, whereas omitting the conflict or tilting the rating to help the employer's client would violate independence and objectivity.
- ADisclose the underwriting relationship and keep the recommendation based on independent analysisCorrect
- BOmit the relationship because it concerns the debt, not the equity
- CIssue only a positive recommendation to support the employer's client
Explanation
Conflicts of interest must be disclosed so readers can judge possible bias, and the opinion must remain independent and objective. Omitting the relationship hides a conflict, and skewing the rating breaches objectivity.
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