Q1. At Brown Investment Analysis Inc., all analysts are required to submit a draft copy of all research reports before certain approved portions of the reports are shared or discussed with the company that is the subject of the report. Any changes that are made to research reports after the reports have been reviewed by subject companies must be approved by the compliance department after it receives a written statement from the responsible analyst justifying the changes. Brown also requires documentation of the process to take place at each step to ensure a review of any report would demonstrate clear justification for alterations in reports that have been partially disclosed to subject companies. Which of the following statements regarding the research policies at Brown Investment Analysis Inc. is CORRECT? The policies are:

A)   recommended by CFA Institute Standards of Professional Conduct.

B)   required by CFA Institute Research Objectivity Standards.

C)   recommended by CFA Institute Research Objectivity Standards.

Q2. All of the following procedures are recommended to comply with CFA Institute Research Objectivity Standards, EXCEPT:

A)   restrict employee trades 30 calendar days before and 5 calendar days after the release of a research report.

B)   update research recommendations annually.

C)   prohibit communication between the research employees and investment banking employees before the publication of a research report.

Q3. Greg Hibbert, CFA, is working with his firm’s compliance department to implement policies and procedures that comply with the requirements of the CFA Institute Research Objectivity Standards (ROS). Hibbert has informed the compliance officer that in order to meet the ROS requirements, the firm must require a written annual update of personal investments held by covered investment personnel or their families, and must provide a list of activities that violate the firm’s policies and the accompanying disciplinary actions to all of the firm’s clients and prospects. Are Hibbert’s statements regarding personal investments and the disclosure of violating activities CORRECT?

     Personal Investments      Violating Activities

A)          Yes                                        No

B)          Yes                                        Yes

C)          No                                         No

答案和详解如下：

Q1. At Brown Investment Analysis Inc., all analysts are required to submit a draft copy of all research reports before certain approved portions of the reports are shared or discussed with the company that is the subject of the report. Any changes that are made to research reports after the reports have been reviewed by subject companies must be approved by the compliance department after it receives a written statement from the responsible analyst justifying the changes. Brown also requires documentation of the process to take place at each step to ensure a review of any report would demonstrate clear justification for alterations in reports that have been partially disclosed to subject companies. Which of the following statements regarding the research policies at Brown Investment Analysis Inc. is CORRECT? The policies are:

A)   recommended by CFA Institute Standards of Professional Conduct.

B)   required by CFA Institute Research Objectivity Standards.

C)   recommended by CFA Institute Research Objectivity Standards.

Correct answer is C)

CFA Institute Research Objectivity Standards (ROS) prohibit analysts from sharing with subject companies any sections of a report that may communicate the recommendation, rating, or price target prior to the report’s publication. It is recommended by the ROS that firms institute policies that require approval from the firm’s compliance department before an analyst shares any information with the subject company. It is also recommended that the firm document and maintain records of information that is shared with subject companies prior to the publication of a research report and any changes that occur subsequent to the information exchange.

Q2. All of the following procedures are recommended to comply with CFA Institute Research Objectivity Standards, EXCEPT:

A)   restrict employee trades 30 calendar days before and 5 calendar days after the release of a research report.

B)   update research recommendations annually.

C)   prohibit communication between the research employees and investment banking employees before the publication of a research report.

Correct answer is B)

Research reports should be updated regularly. Quarterly updates are recommended by the CFA Institute Research Objectivity Standards.

Q3. Greg Hibbert, CFA, is working with his firm’s compliance department to implement policies and procedures that comply with the requirements of the CFA Institute Research Objectivity Standards (ROS). Hibbert has informed the compliance officer that in order to meet the ROS requirements, the firm must require a written annual update of personal investments held by covered investment personnel or their families, and must provide a list of activities that violate the firm’s policies and the accompanying disciplinary actions to all of the firm’s clients and prospects. Are Hibbert’s statements regarding personal investments and the disclosure of violating activities CORRECT?

     Personal Investments      Violating Activities

A)          Yes                                        No

B)          Yes                                        Yes

C)          No                                         No

Correct answer is C)

Neither of Hibbert’s recommendations to his compliance officer are specific requirements of the ROS. They are recommended policies designed to achieve compliance. While the ROS requires a firm claiming compliance to “manage covered employee’s’ personal investments and trading activities’ effectively”, there is no specific requirement related to reporting personal holdings. In addition, firms claiming compliance with the ROS are not explicitly required to disclose to clients and prospects activities that are violations and the resulting punishment for such activities. It is recommended, however, that firms disclose this information to clients and prospects.

thx