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

The marketing division of a broker/dealer asks a sell-side analyst to issue a favorable recommendation on a corporate issuer so the firm can win investment banking business from it. The analyst most appropriately should:

The analyst should resolve the situation or, if it cannot reasonably be avoided, make full and fair disclosure. Standard VI(A) requires avoiding or disclosing conflicts arising from cross-departmental pressure, and internal approval or limited disclosure to marketing does not meet that duty.

  1. Aissue the recommendation, provided the firm's marketing division approves it in writing.
  2. Bissue the recommendation and disclose the banking relationship only to the marketing division.
  3. Cresolve the situation or, if it cannot be avoided, make full and fair disclosure of the conflict.Correct

Explanation

Cross-departmental pressure is a potential conflict, and members must resolve such situations or disclose them under Standard VI(A). Internal approval does not replace avoidance or disclosure, and disclosing only to marketing does not inform clients and the employer adequately.

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