Research Objectivity and Conflicts of Interest

Very Hard Research Objectivity Standards Compensation Arrangements

Julia is an equity analyst at a well-known investment firm. She has recently published several positive reports on a small-cap renewable energy company, GreenFuture Inc. The firm has a long-standing relationship with GreenFuture, including participation in its equity offerings, which has been very lucrative for Julia's firm. However, unbeknownst to Julia, her colleague in the corporate finance division, Marcus, has been working on a deal that involves an upfront payment from GreenFuture for advisory services. This arrangement could significantly influence the objectivity of any future reports Julia publishes about GreenFuture. Under the CFA Institute's Research Objectivity Standards, how should Julia approach this situation?

Julia should continue to issue reports on GreenFuture as she would normally, since she is not involved in the advisory work.

Julia should disclose the relationship between her firm and GreenFuture in her reports to ensure transparency.

Julia should cease publishing any reports on GreenFuture until the advisory work is completed.

Hint

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