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CFA Level I · CFA Level I Exam · Introduction to Equity Valuation

Before issuing a report with a recommendation, an analyst learns that her firm holds a large position in the subject company. Under the CFA Institute Standards, the analyst should most likely:

The analyst should disclose the firm's holding so readers can judge potential conflicts of interest. The Standards on conflicts require full disclosure of matters that could impair objectivity. Hiding the position conceals a conflict, and delaying the report until the firm sells is not required.

  1. Aomit the holding to avoid influencing readers
  2. Bdisclose the holding so readers can judge potential conflicts of interestCorrect
  3. Cdelay the report until the firm sells the position

Explanation

Standard VI requires disclosure of holdings and other matters that could reasonably impair independence or objectivity. Omitting it hides a conflict, and delaying until the firm sells is neither required nor appropriate.

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