CMFAS RES 1A Ethics, Codes & Standards of Professional Conduct question: cent below the buy recommendation carried in the firm's published research

CMFAS RES 1AEthics, Codes & Standards of Professional Conduct

Nadia covers industrial REITs at a CMS licence holder. Her own model, rebuilt after a site visit on 4 March, values Sunhill REIT about 20 per cent below the buy recommendation carried in the firm's published research. The head of the dealing desk asks her to repeat the published view when she speaks to clients until a placement of Sunhill units closes at the end of the month. Which statement best describes the position?

A Nadia may follow the instruction, provided she tells clients that she personally disagrees with the published view
B Nadia should stop covering Sunhill REIT until the placement closes, and take no further action on the request
C The instruction is legitimate, because a firm should present one published view to clients until research is formally revised
D It interferes with research independence: Nadia should investigate the variance, give only her own objective view, and report the pressure

Show the answer and explanation

Answer: D. It interferes with research independence: Nadia should investigate the variance, give only her own objective view, and report the pressure

RES 1B sections 4.4.2.1 and 4.4.2.3, and RES 2B section 5.4.2.1: a variance between an analyst's work and the house view is a prompt to investigate, and every opinion must rest on independent, objective analysis. Pressure from inside the firm while it is placing the same security is a conflict to be escalated, not absorbed. Takeaway: investigate the variance, then report the pressure.

Common mistake

Conforming and dropping coverage both leave the pressure unreported.

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Original study material mapped to the public CMFAS RES 1A syllabus. Unofficial, not endorsed by MAS or IBF. Verify figures and rules against current guidance before relying on them.