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

Roberts buys 100,000 shares of Drew Mining at US$0.30 for her own account. A week later her employer asks her to write a report on mining penny stocks, and she would rate Drew a buy even without owning it. A price surge is likely after publication. Roberts' most appropriate action is to:

Roberts must disclose the conflict to her employer and should consider declining the assignment. If the employer has her write the report anyway, she must disclose the holding in the report. Her independent view does not remove the conflict, and selling afterward without disclosure is improper.

  1. Awrite the report and rely on her independent buy view as sufficient.
  2. Bdisclose the conflict to her employer and consider declining the assignment, disclosing in the report if she writes it.Correct
  3. Csell the shares immediately after the report is issued and disclose nothing.

Explanation

Her personal holding stands to gain from the report's effect, so it is a conflict even if her view is independent. She must disclose it to her employer and should consider declining. If she writes the report, she must disclose the conflict in it. Selling afterward with no disclosure ignores the duty.

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