Reading 3: Ethics in Practice －LOS b, (Part 2)

A firm recently hired Viola Sandoval, CFA, to be a managing supervisor in the firm. Sandoval knows that all of her subordinate supervisors are members of CFA Institute and the firm has a compliance system in place with respect to the Code and Standards. Under these conditions Sandoval needs to:

Steve Reese, CFA, an equity analyst for Bison Investments, has just completed his extensive research on the long-term prospects of ThetaCorp, a small technology firm that creates medical software for hospitals and other medical clinics. Reese has determined that the economic outlook for ThetaCorp warrants issuing a buy recommendation and has reflected this long-term view in his report which is being reviewed by Bisons compliance department. The head of Bisons investment banking department, Mark Hazel, CFA, learned of the report and called Reese to suggest that he increase his recommendation to a strong-buy in an effort to support Bisons bid to be retained as the lead underwriter for an upcoming bond issue by ThetaCorp. Hazel explained that the level of risk that Reese has assigned to ThetaCorp is too high and that with a slight downward adjustment, a strong-buy recommendation would be justified. Reese agreed to the adjustment and updated his report which he then resubmitted to the compliance department which gave its official approval for distribution. According to CFA Institute Standards of Professional Conduct, which of the following is TRUE? Reese has: