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Question of the Week - Ethical and Professional Standards

AdaptPrepAdaptPrep Des Moines, IA, USAPosts: 211 Sr Associate
edited October 2015 in Level 1 Questions
Richard Frizell, CFA has recently completed his research report on Lukesrun, Inc. and he is generally favorable on the stock. The report shows a preliminary “buy” on Lukesrun. Frizell’s supervisor approves the report, and it is being reading for distribution. Frizell recently came across some negative information on the company (publicly available information) and meets with his supervisor. The supervisor advises to go ahead and issue the preliminary report, with no mention of the new negative information. What should Frizell do, in order to properly comply with the Standards?
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Question of the Week - Ethical and Professional Standards 31 votes

Frizell should notify all clients of the additional information on Lukesrun.
9%
gstylemovingdigitsJAG 3 votes
Frizell is in full compliance of the Standards since the added information was publicly available.
9%
Richie321henryb1vinhsg 3 votes
Insist that the report be revised, and if that is not done, he should request to have his name removed from the report.
80%
ZeeMarcMrBlueAdaptPreprsparksabhishekroy3112jmsatchwellgoogs1484CFAI_wont_stop_meYeshankAcefromspaceYannickTs_myersOzymandiasmaoDeekscw24schubby10cunctatorTheClawamerzaat 25 votes

Comments

  • AdaptPrepAdaptPrep Des Moines, IA, USAPosts: 211 Sr Associate
    Insist that the report be revised, and if that is not done, he should request to have his name removed from the report.

    The relevant Standard is:

    Standard V(A) Diligence and Reasonable Basis

    Members and Candidates must:

    1.     Exercise diligence, independence, and thoroughness in analyzing investments, making investment recommendations, and taking investment actions.

    2.     Have a reasonable and adequate basis, supported by appropriate research and investigation, for any investment analysis, recommendation, or action.

    The report needs to be revised. It is not sufficient to just notify clients. The report will be publicly available and it is not accurate. This is also likely a violation of Standard IV(C) Responsibilities of Supervisors. In order to properly comply with Standard V(A), diligence and thoroughness must be exercised in preparing analysis and recommendations.  Frizell has done this. Frizell should document his difference in opinion, and request that his name be removed from the report.

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