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Investment Analysis - V(B) Communication with Clients and Perspective Clients


a. demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations of issues involving issues of personal integrity

b. distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards

c. recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct

What are the three primary directives of Standard V(B) Communication With Clients and Prospective Clients? 1. Disclose to clients and prospective clients the basic format and general principles of the investment processes used to analyze investments, select securities, and construct portfolios. Promptly disclose any changes that might materially affect those processes. 2. Use reasonable judgment in identifying which factors are important to their investment analyses, recommendations, or actions and include those factors in communications with clients and prospective clients. 3. Distinguish between fact and opinion in the presentation of investment analysis and recommendations.

What six components should an analyst consider making available in research reports? 1. Expected annual rate of return, taking into account cash flows and expected price changes during the holding period. 2. Annual amount of income expected (current and future). 3. Current rate of income return or yield to maturity. 4. Degree of uncertainty associated with cash flows. 5. Degree of marketability / liquidity. 6. Business, financial, political, sovereign, and market risks.

Do you need to include expected monthly income projects in your reports? No, only yearly

Is there any particular form of communication that is not considered “a report”? No, all of written, in-person, telephone, media broadcast, email, etc., is considered a report.

What are two example ways that opinion should be separated from fact in a report? 1. Past should be separated from future. Past represents facts, while forecast on future represents opinions. 2. In the case of quantitative analysis, facts should be separated from statistical conjecture.

What should you do with all supporting information for your reports? You should maintain records and be able to provide your supporting information including factors that were not included in the report.

Are you responsible for taking reasonable steps to assure yourself of the reliability, accuracy, and appropriateness of the data included in each report? Yes, this is your responsibility

When should you give attribution to source material? Anytime you use information that is not your own, and not widely disseminated from several sources, you should give source acknowledgment