Question of the Week

Joanne Bume, CFA, is the head of research at large brokerage firm. Currently, her airline analyst has a "market-underperform" rating on Universal Airline Company. Joanne is contacted by Bill Smith, who is not only the head of the corporate finance department for the firm but he is also vice-chairman. It seems that Bill is soliciting some business from Universal however, the current rating imposed by the airline analyst is hampering his efforts. Bill asks Joanne to persuade her airline analyst to revisit the facts about Universal, since "there is so much at stake here". In order not to violate the Standards of Professional Conduct, Joanne should:

A) cease rating Universal Airlines and instead only provide factual statements about the company.
B) assign a different analyst to prepare a new report on Universal.
C) ask Bill to submit, in writing, what he is instructing Joanne to do, and then execute his instructions.


The correct answer is: a)

The proper course of action would simply be to place Universal Airlines on a restricted list until the investment banking relationship with that company comes to an end. However, during the period in which that relationship is active, the research department may only release factual information about Universal. No ratings should be released.

Professionals FAQs
  1. Where can I look for a financial planner?

    References from trusted friends or family members can help you find a financial planner; however, keep in mind that your friends' financial situations and goals may differ from yours and, therefore, their planners won't necessarily be the best fit for you.The Certified Financial Planner (CFP) Board of Standards certifies financial planners and maintains an online list of certified financial planners on its CFP Board of Standards website.
  2. If I am looking to get an Investment Banking job. What education do employers prefer? MBA or CFA?

    If you are looking specifically for an investment banking position, an MBA may be marginally preferable over the CFA. The caveat here is that the MBA would most probably need to be from a Top-20 B-School.The Chartered Financial Analyst (CFA) is well worth considering if you (a) are aiming for an entry-level position in investment banking, and/or (b) cannot afford to shell out six figures for an MBA or have to settle for a lesser-known B-school.That's because in the investment banking field, most entry-level positions are at the analyst level.
  3. Can I still pass the CFA Level I if I do poorly in the ethics section?

    You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't count on it. The CFA Institute has long emphasized that ethics is a particular area of focus for it. The seriousness with which the CFA Institute views ethics is evident from the fact that for exam candidates with borderline total scores, performance on the ethics section can mean the difference between passing and failing the exam.
  4. Under the USA, registration as an IAR includes all of the following EXCEPT:

    Under the USA, registration as an IAR includes all of the following EXCEPT: A. Minimum net capitalB. Passing a qualification examC. Filing a consent to service of processD. Posting a surety bond The correct answer is "A", since only an IA would need to prove minimum net capital requirements.