A research analyst cites data from a suspect source without verifying reliability. Which CFA Institute Standard is violated?

A research analyst cites data from a suspect source without verifying reliability. Which CFA Institute Standard is violated?

• A. Standard V.A Diligence and Reasonable Basis
• B. Standard IV.A Loyalty, Prudence, and Care
• C. Standard VI.A Disclosure of Conflicts
• D. Standard I.C Misrepresentation

Answer: (A)

The key idea is rigorous due diligence: investment analysis and recommendations must be grounded in data that you have reasonably verified. When a source is suspect, you’re required to verify its reliability before using it to form conclusions or cite it in your work. That means checking the source’s credibility, methodology, sample size, time frame, and potential biases, and, if needed, corroborating with independent data. If you can’t verify the data, you should avoid using it or clearly disclose its limitations so the basis for the recommendation remains solid. Citing unverified, questionable data undermines the analyst’s ability to provide a diligent, well-supported analysis, which is precisely what this standard targets. It’s about ensuring the conclusions rest on a reasonable basis, not about intentionally misleading others. Misrepresentation would involve knowingly presenting false information as true, which is a different misconduct; the issue here is the lack of due diligence in relying on unreliable data.

The key idea is rigorous due diligence: investment analysis and recommendations must be grounded in data that you have reasonably verified. When a source is suspect, you’re required to verify its reliability before using it to form conclusions or cite it in your work. That means checking the source’s credibility, methodology, sample size, time frame, and potential biases, and, if needed, corroborating with independent data. If you can’t verify the data, you should avoid using it or clearly disclose its limitations so the basis for the recommendation remains solid.

Citing unverified, questionable data undermines the analyst’s ability to provide a diligent, well-supported analysis, which is precisely what this standard targets. It’s about ensuring the conclusions rest on a reasonable basis, not about intentionally misleading others. Misrepresentation would involve knowingly presenting false information as true, which is a different misconduct; the issue here is the lack of due diligence in relying on unreliable data.