Question #5
Reading: Reading 42.3 Standards of Professional Conduct Guidance for Standards III
PDF File: Reading 42.3 Standards of Professional Conduct Guidance for Standards III.pdf
Page: 2
Status: Correct
Correct Answer: A
Question
Caroline Turner, an analyst for Lansing Asset Management, just completed an investment report in which she recommends changing a "buy" to a "sell" for Gallup Company. Her supervisor at Lansing approves of the change in recommendation. Turner wonders about whether she needs to disseminate this investment recommendation to Lansing's clients and if so, how to distribute this information. According to CFA Institute Standards of Professional Conduct, Turner is:
Answer Choices:
A. required to design an equitable system to disseminate the change in a prior investment recommendation
B. not required to disseminate the change of recommendation from a buy to a sell because the change is not material
Explanation
Standard III(B) – Fair Dealing requires dealing fairly and objectively with all clients and
prospects when disseminating material changes in prior investment recommendations.
Note that the standard requires the dissemination be fair, but not necessarily equal due to
the impossibility of contacting all clients simultaneously. A change of recommendation
from "buy" to "sell" is generally material.
(Module 42.5, LOS 42: III(B))