Milton Baker, CFA, prepares a research report on the dynamics of a stock price. In his study, he uses a considerable number of information sources, both outside sources and his company’s own research papers, prepared for both internal and public use. The report will first be distributed at the monthly department meeting and then later will be published on the company’s Internet site. He thinks that he may have neglected to mention some of his sources in his reference list but decides that he needs to be concerned about full disclosure of his sources only for the public version of the report, so he will wait to revise his work until after the monthly meeting but before it is published on the internet site. Which Standards does Baker NOT comply with? A) Standard I©, Misrepresentation, and I(A), Knowledge of the Law. B) Standard I©, Misrepresentation, I(B), Independence and Objectivity, and I(A), Knowledge of the Law. C) Standard I©, Misrepresentation, only. D) Standard I(A), Knowledge of the Law, and I(B), Independence and Objectivity. The correct answer is A. Why?
It doesn’t matter whether it’s a Public or Private report, he has to disclose in the report the references. Hence he’s violating Standard I© by choosing not to disclose. I’m lost as of why it’s violation of Knowledge of Law. I wonder if its due to infringement of copyrighted information without quoting the source. Again, I could be wrong.
“In his study, he uses a considerable number of information sources, both OUTSIDE SOURCES and his company’s own research papers…” Whenever submitting a report – whether publicly or privately – you must cite your references. Otherwise this is misrepresentation (tangent with plagerizing). And whenever you fail to comply with any of the Standards, you are automatically failing to comply with Knowledge of the Law (i.e. the Institute says “you should’ve known…”).
I(B), Independence and Objectivity is not a problem. Standard I©, Misrepresentation has been violated because of the references problem. I(A), Knowledge of the Law has been violated because he breached the Standards I(A), Knowledge of the Law : “Members and Candidates must comply with all applicable laws, rules and regulations, including the CFAI Code of Ethics and Code of Standards…yada yada yada” Basically, any breach of the Standards is also a breach of I(A), Knowledge of the Law.
A whats the answer
thanks guys.
Bump The answer is obviously A, through process of elimination. The key point here is realizing what newsuper said, that " any breach of the Standards is also a breach of I(A), Knowledge of the Law."