Scenario of Research Objectivity in Investment Banking Relationships

Very Hard Research Objectivity Standards Investment Banking Relationships

Jenny is an equity research analyst at a well-established investment firm that maintains a significant investment banking division. Recently, her firm was engaged by a company, TechCo, for an initial public offering (IPO). Shortly before the IPO, Jenny published a report that forecasted an optimistic growth outlook for TechCo, predicting a substantial rise in its stock price post-IPO. However, during her research, Jenny discovered that one of her firm’s investment bankers is the lead underwriter for the IPO and has been pressuring her to produce favorable research to help bolster investor interest.

Given the circumstances, what should Jenny consider doing to adhere to the CFA Institute’s Research Objectivity Standards, particularly in the context of her firm's investment banking relationships?

Publish her report as originally written without any modifications since the investment banking relationship does not require adjustments to her analysis.

Disclose the investment banking relationship in her report but maintain her initial optimistic outlook as the analysis was based on her professional judgment.

Revise her report to reflect a more cautious outlook and disclose the influence of the investment banking relationship to maintain objectivity.

Hint

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