Q4. Perry Smith is a research analyst for Hugley Financial Corp. For the past several weeks, Smith has diligently researched the economic condition of BNS Inc., an international pharmaceuticals manufacturer. Smith has determined that the BNS’ secondary common stock offering is a strong buy and has disseminated this opinion to Hugley’s research subscribers. One month after issuing the recommendation, the price of BNS’ stock had risen by over 13 percent. The director of Hugley’s investment banking division, which underwrote BNS’ secondary offering, called to thank Smith for his participation in the offering and to notify him he will receive a stock option bonus next week as a result of the outstanding performance of BNS’ stock. Has Hugley Financial Corp. violated any CFA Institute Research Objectivity Standards?

A)   No.

B)   Yes, since the analyst’s bonus was inappropriately structured as stock options.

C)   Yes, since the performance of the secondary offering led to a bonus for the analyst.

Q5. Alexis Capital is a full service investment banking and advisory firm. Jason Beech, head of Alexis’ investment banking division, has just received a research report on a national supply-chain management firm which has used Alexis as the underwriter in several public debt offerings. While reading through the report Beech realizes that the sales projections for the firm have been substantially overestimated in the short-term forecast. Beech calls the author of the report, Steve Henderson, a sell-side equity analyst, to inform him of the error. Henderson confirms that there was a slight error in the forecasting model and agrees to change the sales forecast before publishing the report the following day. Do Alexis Capital’s policies violate any CFA Institute Research Objectivity Standards?

A)   No, since the firm is able to objectively ensure the accuracy of investment research.

B)   No, since the firm provides multiple layers of review before making research publicly available.

C)   Yes.

Q6. Kevin Bryan is a financial analyst for Summit Investments. Bryan recently completed a research report recommending the stock of Independence Medical Company. Bryan failed to disclose that he has a material ownership interest in Independence Medical through a family trust.

Kim Scott, a CFA Charterholder with Overland Associates, is invited to attend an investment management conference in the Cayman Islands. The sponsor, one of Scott’s clients, has offered to reimburse Scott for all of her expenses. Scott accepts the sponsor’s offer and discloses the arrangement to her employer in writing.

Based on the CFA Institute Research Objectivity Standards, which of the following statements is TRUE?

A)   Both Summit and Overland are in violation of the Research Objectivity Standards.

B)   Neither Summit nor Overland is in violation of the Research Objectivity Standards.

C)   Summit is in violation of the Research Objectivity Standards but Overland is not in violation.

答案和详解如下：

Q4. Perry Smith is a research analyst for Hugley Financial Corp. For the past several weeks, Smith has diligently researched the economic condition of BNS Inc., an international pharmaceuticals manufacturer. Smith has determined that the BNS’ secondary common stock offering is a strong buy and has disseminated this opinion to Hugley’s research subscribers. One month after issuing the recommendation, the price of BNS’ stock had risen by over 13 percent. The director of Hugley’s investment banking division, which underwrote BNS’ secondary offering, called to thank Smith for his participation in the offering and to notify him he will receive a stock option bonus next week as a result of the outstanding performance of BNS’ stock. Has Hugley Financial Corp. violated any CFA Institute Research Objectivity Standards?

A)   No.

B)   Yes, since the analyst’s bonus was inappropriately structured as stock options.

C)   Yes, since the performance of the secondary offering led to a bonus for the analyst.

Correct answer is C)

CFA Institute Research Objectivity Standards (ROS) require that an analyst’s compensation not be directly linked with any investment banking activities on which the analyst collaborated. The stock option bonus was inappropriately based upon the performance of the secondary offering of BNS stock and is a violation of the ROS. The ROS have also been violated by Hugley’s lack of procedures to separate the research and investment banking functions of the firm.

Q5. Alexis Capital is a full service investment banking and advisory firm. Jason Beech, head of Alexis’ investment banking division, has just received a research report on a national supply-chain management firm which has used Alexis as the underwriter in several public debt offerings. While reading through the report Beech realizes that the sales projections for the firm have been substantially overestimated in the short-term forecast. Beech calls the author of the report, Steve Henderson, a sell-side equity analyst, to inform him of the error. Henderson confirms that there was a slight error in the forecasting model and agrees to change the sales forecast before publishing the report the following day. Do Alexis Capital’s policies violate any CFA Institute Research Objectivity Standards?

A)   No, since the firm is able to objectively ensure the accuracy of investment research.

B)   No, since the firm provides multiple layers of review before making research publicly available.

C)   Yes.

Correct answer is C)

CFA Institute Research Objectivity Standards require firms to institute procedures that prevent investment banking divisions from having direct authority over the research department to review, modify, approve, or reject its research as this poses a threat to the independence and objectivity of a firm’s research.

Q6. Kevin Bryan is a financial analyst for Summit Investments. Bryan recently completed a research report recommending the stock of Independence Medical Company. Bryan failed to disclose that he has a material ownership interest in Independence Medical through a family trust.

Kim Scott, a CFA Charterholder with Overland Associates, is invited to attend an investment management conference in the Cayman Islands. The sponsor, one of Scott’s clients, has offered to reimburse Scott for all of her expenses. Scott accepts the sponsor’s offer and discloses the arrangement to her employer in writing.

Based on the CFA Institute Research Objectivity Standards, which of the following statements is TRUE?

A)   Both Summit and Overland are in violation of the Research Objectivity Standards.

B)   Neither Summit nor Overland is in violation of the Research Objectivity Standards.

C)   Summit is in violation of the Research Objectivity Standards but Overland is not in violation.

Correct answer is C)

Summit is in violation because policies and procedures were not in place to prevent Bryan from recommending a stock without disclosing a potential conflict of interest. Overland is not in violation. Scott can accept reimbursement since the sponsor is a client and the reimbursement was disclosed to Overland.

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