Ethyl Redd recently joined Bloomington Investments as a research analyst. After spending an afternoon looking through the research team’s archives, Redd is not sure Bloomington maintains the records that support the team’s analysis and recommendations for the minimum 7-year period called for by Standard V(C), Record Retention. What is Redd’s most appropriate course of action?
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Standard V(C), Record Retention requires that members maintain all records supporting analysis, recommendations, actions, and all other investment related communications with clients and prospects. The recommended procedures for compliance with Standard V(C) state that the record-keeping requirement is generally the firm’s responsibility. These records are the property of the firm, so Redd keeping her own copies at home could potentially violate Standard IV(A), Loyalty. Redd’s best course of action is to review the firm’s procedures with her supervisor and recommend any improvements that are necessary to bring them into compliance with Standard V(C).
According to CFA Institute Standards of Professional Conduct, members should do all of the following to meet the compliance procedures for having a reasonable basis for recommendations, EXCEPT:
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Standard V(C), Record Retention, requires that members maintain appropriate records to support the reasonableness of such recommendations or actions, but they are not required to distribute a research report with each recommendation.
Lee Hurst, CFA, is an equity research analyst who has recently left a large firm to start independent practice. He is able to re-create several of his previous recommendation reports from memory, based on sources obtained at his previous employer. He publishes the reports and obtains several new clients. Hurst is most likely:
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Hurst is most likely in violation of Standard V(C) "Record Retention" because the supporting documentation is unavailable. He needs to recreate the supporting records based on information gathered through public sources or the covered company.
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