Compensation Arrangements and Research Objectivity

Medium Research Objectivity Standards Compensation Arrangements

As an analyst at a large investment firm, Maria is responsible for producing research reports on various companies. Recently, her firm entered into a compensation agreement with a hedge fund that involves the fund paying her firm for research services. The agreement specifies that the hedge fund will receive reports prior to their public release, providing them with a competitive edge in the market. Maria is aware that her firm’s management encourages analysts to consider the hedge fund's interests in their research to ensure continued compensation.

This situation raises concerns regarding the Research Objectivity Standards as outlined by CFA Institute. Which of the following actions should Maria take to ensure compliance with these standards?

Maria should continue producing reports as per the compensation agreement, ensuring the hedge fund receives the information they have paid for.

Maria should inform her management that the arrangement compromises her objectivity and request to terminate the agreement.

Maria should disclose the compensation arrangement in her research reports, highlighting the potential conflicts of interest.

Hint

Submitted5.1K

Correct2.6K

% Correct52%