Bill Fox, CFA, has been preparing a research report on New London Wire and Cable, one of his major investment clients. He had completed much of his analysis and had planned on having his report typed and bound today. Unfortunately, his briefcase was stolen while he ate breakfast, and he lost all his notes and working papers. The lost materials included his notes from management interviews, conversations with suppliers and competitors, dates of company visits, and his computer diskette containing much of his quantitative analysis. Fox’s client needs this report tomorrow. In a panic, Fox called New London’s vice president of finance and was faxed a copy of the company’s most recent financial projections. Fox remembered that his own analysis showed that management’s estimates were too high. He did not remember the exact amount, so he revised New London’s figures downward 10 percent. Fox also incorporated some charts and graphs on New London from a research report he had received last week from a small regional research firm and used some information from a Standard & Poor’s reference work. With the help of his secretary, a Xerox machine, and some creative word processing, Fox got the report done in time for the evening Fedex pick up. On the way home from the office that night, Fox wondered if he had violated any CFA Institute Standards of Professional Conduct. Fox has: A) violated none of the Standards. B) violated the requirement to have a reasonable basis for a recommendation, the prohibition against plagiarism, and the requirement to maintain appropriate records. C) violated the requirement to have a reasonable basis for a recommendation. D) violated the requirement to have a reasonable basis for a recommendation and the prohibition against plagiarism. Answer B New London’s report is potentially self serving, so Fox did not exercise diligence or have an adequate basis for his recommendation. In addition, Fox did not acknowledge his source of the charts and graphs. Finally, he did not maintain adequate records. ***************** My take: I agree with not having a reasonable basis and plagiarism. But why failure to mantain records. His briefcase was stolen, thats not his fault. But nowwhere it says that he did not mantain records in respect to his new report. He did not have a reasonable basis for revising Fox’s figure down 10% or is the memory bit relevant to failure in mantaining records.
I hope a question this long never appears in the real exam. We are supposed to apend about a minute or so on each question…reading this carefully requires 2 minutes!
QBank has plenty of these essay type questions. I really don’t want to see them on the exam
If you’re carrying around information critical for your business in a briefcase, you’re taking on risk. Whether or not that’s an ethcal problem is a tough call. Diamond merchants in NYC carry simple briefcases filled with diamonds sometimes.
JoeyDVivre Wrote: ------------------------------------------------------- …Diamond merchants in NYC carry > simple briefcases filled with diamonds sometimes. Bet they haven’t read thru the code of ethics.
I’d say B is the answer, only because of “record retention” violation. don’t see a plagiarism or adequate basis violation here.