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Postby prateek.jain1284 » Tue Sep 25, 2012 12:39 pm

Meshack Bradovic, CFA, was recently hired as a credit analyst at a credit rating agency whose major clients include publicly listed companies on the local stock exchange. One of the clients is currently preparing to issue a new bond to finance a major factory project. Analysts are speculating that without the new factory the company will not survive the onslaught of competition from increasing imports; therefore, the company is counting on an upgraded credit rating to enhance the subscription level of the issue. Bradovic’s research suggests the creditworthiness of the company has severely deteriorated over the last year due to negative operating cash flows. Without conducting extensive research, Bradovic’s boss puts pressure on him to upgrade the credit rating to an investment grade rating. What course of action is most appropriate for Bradovic to prevent any violation of the CFA Code or Standards?

A. Quit his position with the firm.
B. Upgrade the rating but note his objections in writing.
C. Disassociate with the credit rating report, the bond issue and the client. Answer = A
“Guidance for Standards I-VII,” CFA Institute
2011 Modular Level I, Vol. 1, pp. 108,110

Study Session 1–2–c
Recommend practices and procedures designed to prevent violations of the Code of Ethics and
Standards of Professional Conduct.

A is correct as the boss’ insistence that all credit ratings be given an investment grade rating irrespective of the analysis undertaken indicates a systemic disregard for due diligence, reasonable basis and true representation. This shows a total disregard for the CFA Standards. Bradovic’s best course of action consequently is to resign, as the company’s current practice of giving false credit ratings is likely to continue.

BOSS is not pressuring him to change [b]all
the ratings, so in that case answer should be C. Please correct me if i am wrong[/b]


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Re: Ethics

Postby content.pristine » Wed Sep 26, 2012 8:38 pm

Hi Prateek,

It looks like you have taken a question from the 2011 curriculum. This question was not in the curriculum for neither 2012 nor 2013 so I am assuming there is some ambiguity.
In cases like this, when the boss is biased, one needs to contact her supervisors and the compliance department. You can check out the example 6 on page 34 2013 curriculum, which has a similar question.
It says she must say "she cannot cover this company on this constraint or she can share the conclusions with her boss and other supervisors so they can make the appropriate recommendation."
So, in my opinion, your answer "C"is correct.
However, let me check up with a few more of our ethics instructors..

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Re: Ethics

Postby prateek.jain1284 » Thu Sep 27, 2012 8:10 am

These questions were sent by Anil Agarwal, stating that these ethics questions are provided by CFA institue( being pristine an official provider of CFA). In the questions on Ethics there were more ambiguous questions, which i cannot highlight because of lack of time.

If these questions are from earlier curriculum and the answers are incorrect/ambiguous, then please ask anil to refrain from distributing them and only provide the correct questions.

These are revision times going on and wrong questions will certainly make a dent in our preparation and prove detrimental to our result. I've joined pristine for the quality material and do not expect material which is either outdated or ambiguous. Please rectify it at the earliest.

P.S. The questions I am referring to are the 73 questions on ethics he has sent us.

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