Guidance for Standards I(A) and I(B) Flash Cards

A CFA charterholder is asked to write a research report on a company that is also a client of the analyst’s employer. To maintain independence and objectivity, the analyst should:

disclose the conflict and ensure the report is based on independent and unbiased analysis.

A CFA charterholder is hired to write research sponsored by a company seeking to raise capital. To comply with the CFA Institute Code and Standards, the analyst should:

negotiate a fixed compensation amount before conducting the research.

A CFA charterholder conducts business in a foreign country where new securities regulations were recently introduced. The charterholder unknowingly fails to follow one of these new rules but corrects the mistake immediately upon notification by the local regulatory authority. Has the charterholder violated Standard I(A)?

Yes, because the charterholder failed to stay informed of applicable laws and regulations.

A CFA charterholder changes her investment recommendation after overhearing a conversation between two analysts discussing a company's potential merger. She does not conduct any further analysis before issuing the new recommendation. This action is a violation of:

Standard V(A), Diligence and Reasonable Basis.

A CFA charterholder is evaluating whether to use client brokerage to purchase third-party research that may benefit other clients. Which Standard primarily governs the member’s responsibility in this situation?

Standard III(A), Loyalty, Prudence, and Care.

Priya Nair, CFA, is registered in the country of Westoria, where investment professionals are prohibited from accepting any form of compensation or gifts from external parties in connection with investment analysis. While traveling for business in Eastaria, where no such restrictions exist, Nair receives a valuable bottle of wine from a company she is evaluating for potential investment.What is Nair’s most appropriate course of action under the CFA Institute Code and Standards?

Decline the gift, because the laws of Westoria prohibit such acceptance.

Rachel Tan, CFA, relocates her investment advisory practice from a country with stringent disclosure laws to a jurisdiction with relatively relaxed securities regulations. In her new country, she is no longer legally required to inform clients about certain conflicts of interest related to her firm’s compensation arrangements. However, the CFA Institute Code and Standards impose stricter disclosure requirements.According to the CFA Institute Code and Standards, Tan must:

adhere to the stricter of the local law or the CFA Institute Code and Standards.

A CFA charterholder is working in a country where securities regulations are less strict than those imposed by the CFA Institute Code and Standards. To remain in compliance, the charterholder must:

comply with the stricter of the local laws or the CFA Institute Code and Standards.

Emily Zhang, CFA, is visiting a publicly traded tech firm as part of her industry research. While waiting for a meeting to begin, she overhears senior managers discussing an unannounced partnership with a major global retailer. Believing this could significantly impact the firm’s stock price, Zhang considers updating her recommendation to clients.According to the CFA Institute Code and Standards, Zhang should:

wait until the news is public, then revise her recommendation accordingly.

Maya Li, CFA, receives a phone call from a supplier of Orbitron Corp., who reveals that the company has placed a significantly higher number of orders this quarter—information that has not yet been disclosed to the public. Li currently has a neutral rating on Orbitron based on expected flat revenue growth.According to Standard II(A) Material Nonpublic Information, Li should:

urge Orbitron to disclose the information publicly and refrain from taking any investment action until it is publicly available.