CFA二级题目：Boston Group

　　Boston Group is a full-service financialfirm that provides investment banking, insurance, brokerage and investmentmanagement services. Boston has complied with the CFA Institute ResearchObjectivity Standards ,including both the required and recommended policies andprocedures, to demonstrate their commitment to managing and fully disclosingconflicts of interest to all investors with access to the firm's research.

　　Brad Pitt, CFA ,is an junior researchanalyst at Boston, He is responsible for following the airline stocksfor thefirm's research department that provides the research to Boston clients andsells it to outside parties. He is working on two follow-up reports for InternationalAirlinesand Asiana Airlines. Boston is a market maker for  both companies' securities and Pitt purchasesa little shares of International Airlines for her personal account.

　　Pitt has a good relationship with companyofficials at International Airlines, and his past research reports made strongbuy recommendationsfor the company on the website indicating that the stock isexpected to increase.. In appreciation for her work on International Airlines, Pittwas invited by International Airlines to join a company-sponsored event held atan exclusive beach resort overseas last December . International Airlinesoffered to pay for Pitt’s accommodations and the round way tickect. They also providedsome excellent entertainment activities for attendees. Before attending thecompany-sponsored event participating, Pitt disclosed the agenda for the tripto his boss at Boston, but he did not mentioned the details concerning expensesbecause he didn’t consider they were material. After Pittreturned from thistrip,he heared the news that Boston was named the lead underwriter for InternationalAirlines’ upcoming secondary offering. Pittbelieves her goodrelationship with InternationalAirlines played a large part in securing this business.

　　Pitt, however, considers his relationshipwith Asiana Airlines to be contentious since company officials appear reluctantto share as much information with her as they have in the past. He believesthis change in behavior is a direct result of her recent less-than-favorablereports she wrote on Asiana Airlines. Pitt shares with top management at InternationalAirlines, prior to publication of his follow-up reports, all the contents ofhis research report on International Airlines . But to Asiana Airlines management,he just provided only the factual information component of his research reporton Asiana Airlines prior to publication. Boston establish and implement salary,bonus , and other compensation for research ananlysts that align compensationwith the quality of the research including the reasonblemess and adequacy ofthe basis for any recommendation and the accuracy of recommendations over timeand the overall profitability of the group The extent to which research analystcompensation in general is dependent upon the firm's investment bankingrevenues, identifying the exact dollar amounts moved from one unit to the otheris disclosed by Boston..

　　Following the release of her reports inearly March, Pittis invited to appear on a global financial news televisionprogram where he will discuss his recommendations on both InternationalAirlines and Asiana Airlines. During her appearance, she makes the followingstatements:

　　Statement 1. My firm is a market maker for bothcompanies' securities and I purchased a little shares of International Airlinesfor my personal account.

　　Statement 2. I now believe a sell rating ismore appropriate for Asiana Airlines after meeting with management yesterday althoughmy report on Asiana Airlines issued last quarter reflected a neutral rating,. Updatedresearch report for Asiana Airlines will be released tomorrow after I finalized.

　　Back to his office the following day, Pitt isinformed by his supervisor that one of Asiana Airlines upper managment calledto express his disappointment and anger regarding the negative recommendation hemade about Asiana Airlines during the global financial news television program.Pitt believes his deteriorating relationship with Asiana Airlines will make itdifficult to effectively take over coverage of the company in the future.Privately, hewonders if heshould revise hisrecommendation, ask permission of hissupervisorto discontinue coverage of Asiana Airlines, or request another analyst beassigned to the company.

　　Whichof the following actions is most consistent with the CFA Institute Standardsprior to participating the company-sponsored event??

　　A.Declinethe invitation.

　　B. Disclosethe details concerning expenses to her immediate supervisor.

　　C. Requesther company pay costs related to her attendance.

　　A is correct.

　　Even if Pitt discloses the cost of hisattendancehemay still not be permitted to take the trip depending upon hiscompany'spolicies. In addition, the disclosure in this case is not enough to avoid apotential violation of Standard I(B) relating to independence and objectivity.By allowing the corporate issuer to pay for his travel expenses his judgmentcould be compromised. It is more appropriate for Pitt to decline the invitationor have his company pay all costs for the trip in order to avoid any conflictor appearance of conflict.

　　Basedon CFA Institute Research Objectivity Standards, which of the following didPitt most likely violate with respect to his report when sharing hisresearch reportwith the subject companies?:

　　A.AsianaAirlines.

　　B. BothInternational Airlines and Asiana Airlines.

　　C. InternationalAirlines.

　　C is correct.

　　Pittviolated Requirement 6, Relationshipswith Subject Companies, by sharing all the contents of research report with InternationalAirlines. Sharing any section of a research report that might communicate theanalyst's proposed recommendation, rating, or price target is prohibited by theResearch Objectivity Standards. Sharing historical factual information on theother hand is not a violation.

　　RegardingPitt’s compensation structure, is Boston’s actions most consistent with the  CFA Institute's Research ObjectivelyStandards?

　　A.No,with respect to accuracy of analyst recommendations.

　　B. No,with respect to overall profitability of the group.

　　C. Yes.

　　C is correct.

　　Research Objectivity Requirement 5,Research Analyst Compensation, recommends analyst's compensation be based onthe accuracy of recommendations over time. In addition, compensation should notbe directly linked to investment banking or other finance activities, which itis not in this case. Pitt’sbonus is based on the group's overall performanceand is not specific to the research support she provides to various divisions.

　　DoesPitt's first statement during his TV appearance most likely meet the CFAInstitute Research Objectivity Standards recommendations?

　　A.No,  with respect to International Airlines ,Pittdoesn’t provide all the recommended disclosures relating to potential conflictsof interest.

　　B. Yes.

　　C. No,with respect to Asiana Airlines, Pitt doesn’t provide all the recommendeddisclosures relating to potential conflicts of interest.

　　Ais correct.

　　Pitt fully disclosed personal and firmconflicts of interest with respect to Asiana Airlines. But he should havedisclosed the "benefit received" from International Airlinesconcerning the company-sponsored event he attended , as well as her smallequity position in International Airlines as required by Research ObjectivityRequirement 2, Public Appearances.

　　DoesPitt’s second statement during the television program tmost likely consistentwith both the required and recommended CFA Institute Research ObjectivityStandards?

　　A.Yes

　　B. No,with regards to the timing of her updated research report

　　C. No,with regards to her inconsistent recommendations

　　C is correct.

　　Research Objectivity Requirement 11, RatingSystem, prohibit employees’ recommendation different from publishedrecommendation.

　　Whichof the following is the least appropriate course of action for boston to take withrespect to LeCompte's coverage of UniFlash, according to CFA InstituteStandards?

　　A.discontinuecoverage.

　　B. upgraderecommendation.

　　C. changeassigned analyst.

　　B is correct.

　　According to the CFA Institute StandardsI(B), members and candidates must use reasonable care and judgment to achieveand maintain independence and objectivity in their professional activities. Andaccording to the CFA Institute Standards V(A), members and candidates must exercisediligence,independence,and thoroughness in analyzing investment, makinginvestment recommendation,and taking investment actions. Changing a writtenrecommendation to what a subject company desires is not acting diligently,independently, objectively, and/or thoroughly and the analyst shouldimmediately revise her recommendation to express her stated opinion of thecompany.