Answer-first summary for fast verification
Answer: No
## Explanation Parra's actions **did not violate** the Standards. Here's why: ### Standard V(A) - Diligence and Reasonable Basis This standard requires members to: - Exercise diligence, independence, and thoroughness in analyzing investments - Have a reasonable and adequate basis for investment recommendations ### Analysis of Parra's Actions 1. **Consulted industry specialists** - This demonstrates external research and due diligence 2. **Understood Fallon's model well** - Parra didn't blindly rely on the model; she comprehended it 3. **Model included extreme scenarios** - The statistical model considered both positive and negative outcomes 4. **Unforeseen event caused losses** - The losses resulted from an event that was not reasonably predictable ### Key Points - Investment professionals are not expected to be perfect or predict all future events - The standard requires a **reasonable basis**, not infallibility - Parra conducted proper research, understood the tools used, and made recommendations based on available information - The fact that an unforeseen event caused losses doesn't automatically mean the original analysis was deficient Parra followed a diligent process and had a reasonable basis for her recommendation, so she did not violate the Standards.
Author: LeetQuiz Editorial Team
Ultimate access to all questions.
Mariana Parra, CFA, is an investment analyst. After consulting industry specialists, Parra believes oil prices will become less volatile over the coming months. Parra's colleague, Jeremy Fallon, constructs a statistical model of oil prices, including extremely positive and negative scenarios. Parra understands the model well and relies on it for her analysis. Parra then recommends an options strategy to clients to take advantage of expected lower volatility. Within a month, clients who followed the recommendation suffer large losses due to an unforeseen event.
Did Parra's actions violate the Standards?
A
No
B
Yes, by relying on Fallon's model for her analysis
C
Yes by issuing a recommendation resulting in large losses for her clients
No comments yet.