Sending Report to CFO

Anna Nichols is a research analyst preparing a report on Enterprise Company. In order to ensure accuracy in her report, she sends the report to the Chief Financial Officer (CFO) of Enterprise to allow him to point out some factual errors. The CFO makes some corrections, which Nichols checks and agrees with. The CFO also sends Nichols several pages of market analyses that appear favorable for Enterprise. Nichols checks the analyses for accuracy and includes a summary of them in her report, pointing out that the data came from Enterprise. Nichols has: A) violated the Standards of Professional Conduct by sending the report to the CFO before sending it to her clients. B) violated the Standards of Professional Conduct by not including all of the data the CFO provided to her. C) violated the Standards of Professional Conduct by including the data from the CFO in the report. D)not violated the Standards of Professional Conduct. Your answer: D was correct! It is perfectly acceptable to send the report to management to check for factual errors and to use judgment in editing the data provided in the report. -------------------------------------------------------------------------------------------------------------------- Just to make sure, you are only supposed to send certain information to the company to check for factual accuracy, not the whole report right?

That is in the ROS. You can send facts, but nothing can hint of your eventual recommendation regarding the stock.

Just factual information can go to them. Under NO circumstances should they see or get a hint as to your actual recommendation regarding their stock

Yes - just the facts can be shared. No part of the recommendation can be conveyed. I thought that if there were any changes that the report also needed to be run up the flag pole to compliance…even if they were factual. That may be a recommended, not required element, of the code and standards. Any thoughts?

yes you can send it for factual information only. You cannot include any recommendation. my only question is whether the compliance officer of Anna Nichols should have been made aware of the changes and about the info received from the company?

The question clearly states that she sends ‘the report’ and not just an extract of factual information. I don’t see how you’re meant to judge that it excludes the conclusion of the report in terms of a recommendation. Doesn’t that make it a violation?

it does seem like a violation.

Its a crappy question. The actual exam would leave no doubt in your mind as to what the report included when it was sent to the CFO.