I just made a mock exam with this both problems in it, and the correct answers contradict each other, what do you think?
Rafael Stuart is a research analyst at Grand Investment Associates (GIA), a U.S. based financial advisory firm that targets private wealth clients. Stuart, along with a group of research analysts at GIA, is preparing a report on Tetragonal Corporation (TETCO), a large-cap technology firm. Based on a comprehensive analysis of the firm’s pro forma financial statements, Stuart reached the conclusion that TETCO’s next quarter’s EPS would be at least 5% lower than consensus. Stuart’s research team, however, disagrees, and publishes the report including a ‘buy’ recommendation. To be in compliance with CFA Institute Standards of Professional Conduct, Stuart should most likely:
A. remove his name from the report before it is published.
Frank Liew is a research analyst who is working with a team of analysts to produce a report on a large, multinational firm. Each member performs an independent analysis of the firm based on comprehensive data about the firm’s financials and its competitor strategies. However, after developing his recommendation, Liew discovers that the consensus opinion differs significantly. The report is published with Liew’s name included in the list of analysts.
By opting not to dissociate from the report, Liew has most likely: A. not violated any Standards.
First off, its misleading presenting only the correct answers. When the question is “should most likely”, you have to weigh all three answers to choose the correct one. So that in itself makes your question if they contradict each other, difficult to answer.
But I can see a difference in the way they are asked.
Q2 is clearly correct. It explicitly states that each member performs an independent analysis based on comprehensive data. You do not have to disassociate from a report if you disagree with it, as long as it’s based on proper research.
Q1 is not as explicit. It states that Stuart performs a comprehensive analysis. In no part of the question does it say his research team does. They may have, but they may not have. So now this comes down to what the 3 options were. You can’t infer facts that aren’t presented. You can’t assume the research teams recommendation is based on proper research if you aren’t told that in the question.
I passed all 3 levels on the first try. Did countless ethics practice problems, and every exam there were ethics problems where I just wasn’t sure. My advice, do your practice problems, know the material but also know that come exam time you may not be sure. Don’t get bogged down on any question. Choose your best guess and move on.
Yes, it makes it hard to answer with only the correct answers presented.
The way I take these questions…
Q1 - he disagrees with the report. He should disassociate himself with recommendation he disagrees with.
Q2 - he does not disagree with the report. It is different than consensus, but he does not disagree. It is possible for a report to be different than consensus. It does not make it wrong/right.