Question #16
Reading: Reading 42.5 Standards of Professional Conduct Guidance for Standards V
PDF File: Reading 42.5 Standards of Professional Conduct Guidance for Standards V.pdf
Page: 10
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
Randal Brooks is the chief economist for a large brokerage firm. In the aftermath of a national tragedy, Brooks feels that it is very possible that the stock market will drop significantly and not recover for several years. However, he does not believe that this is the most likely scenario but merely that the risk of investing in equities has increased. He decides to write a market commentary to the brokerage clients that discusses the reasons why the market will remain stable and talks about why he, as a private citizen, feels patriotic. He does not mention the increase risk in equities. Brooks has:
Answer Choices:
A. violated the Standards by not including all of the relevant factors in the research report, but not by making patriotic statements
B. violated the Standards by not including all of the relevant factors in the research report and making patriotic statements
C. not violated the Standards
Explanation
By not mentioning the increased risk of the market, Brooks has violated the Standard on
using reasonable judgment in a research report. However, the patriotic statements do not
violate the Standards.