In the PM cfai mock exam there was a question asking which of the following was a requirement rather than a recommendation of Standard 6.0 Relationships with Subject Companies.
Suggestion 1 Evergreen’s analysts should not promise a subject company a specific target price or rating.
Suggestion 2 Only factual portions of the report should be sent to the subject company prior to publication for verification.
Schweser says the following:
Analysts must not allow the subject company, prior to publication, to see any part of the research report that might signal the analyst’s recommendation or rating, or make any promises concerning a specific recommendation or rating.
Research analysts must be prohibited from: directly or indirectly promising a subject company or other corporate issuer a favorable report or a specific price target, or from threatening to change reports, recommendations, or price targets.
This one is under Requirements, page 214 of the Curriculum Book 1, E-book edition
Firms should implement procedures that ensure that only those sections of the report containing facts that could be reasonably checked or verified by the subject company are shared prior to publication
This one is under Recommended Procedures, page 217 of the Curriculum Book 1, E-book edition
schweser isn’t wrong per se, here’s the full excerpt of standard 6 of ROS from the curriculum ebook regarding Requirements :
6.0. Relationships with Subject Companies
Firms must implement policies and procedures that manage the working relationships that research analysts develop with the management of subject companies.
Research analysts must be prohibited from:
sharing with, or communicating to, a subject company, prior to publication, any section of a research report that might communicate the research analyst’s proposed recommendation, rating, or price target; and
directly or indirectly promising a subject company or other corporate issuer a favorable report or a specific price target, or from threatening to change reports, recommendations, or price targets.
I’m starting to think that the trick is that its not required to send the company anything, and suggestion 2 might be trying to say that you MUST send the client the factual portion…
the requirement states that we must not share info that potentially signals the analyst’ judgment/rating/recommendation, what kind of info is not clear-cut. yay subjectivity!