Ethical Compensation Arrangements in Research

Hard Research Objectivity Standards Compensation Arrangements

As a research analyst at a prestigious investment firm, Mark specializes in equity analysis. Recently, Mark has been approached by a local start-up company, which is looking to go public and has expressed interest in hiring Mark's firm for its IPO process. The start-up offers Mark a substantial financial incentive in the form of performance-based bonuses that are tied to the success and demand of the IPO issuance. As the situation unfolds, Mark finds himself torn between the potential for personal financial gain and the ethical obligations of providing unbiased and objective research.

According to the CFA Institute's Research Objectivity Standards, particularly the standards regarding compensation arrangements, which course of action should Mark take to uphold his ethical responsibilities?

Decline the bonus arrangement and ensure that his research is based solely on the merits of the start-up, free from any influence.

Accept the bonus under the condition that he will publicly disclose this arrangement in his research reports.

Proceed with the bonus agreement, believing that he can maintain objectivity despite the potential conflict of interest.

Hint

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