Kirsten Kelso, CFA, is a research analyst at an independent research firm. Kelso is part of a team of analysts who focus on the automobile industry. Recently, Kelso disagreed with two research sell recommendations written by her team, even though she felt confident the research process was properly conducted. In a webcast open to all institutional but not retail clients, Kelso states, “Even though my name is on the sell reports, these stocks are a buy in part because sales and share prices for both auto companies will rise significantly because of strong demand for their vehicles.” Kelso’s actions would least likely violate which of the following CFA Institute Standards of Professional Conduct?
A. Communication with Clients B. Diligence and Reasonable Basis C. Fair Dealing
Answer = B
The recommendation is based on a reasonable and adequate research process, so the analyst could follow the research team’s opinion, as required by Standard V(A)–Diligence and Reasonable Basis. I think the correct answer should have been A, not B. Fair dealing was violated since the webcast was open to all institutional but not retail clients. Diligence and Reasonable Basis was also violated since what Kelso communicated during the webcast was different from what was recommended by her team even though she felt confident the research process was properly conducted. So, I think Kelso least likely violated standard Communication with Clients.
Let me know what you think! Thanks in advance.