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Answer: her report is a draft.
## Explanation This question tests understanding of Standard II(A): Material Nonpublic Information and Standard III(B): Fair Dealing. ### Analysis of Options: **Option A: "her report is a draft."** - This is the LEAST likely reason she violated the Standards. The fact that the report is a draft does not excuse selective disclosure of material information. Research reports, even in draft form, contain material information that should be disseminated fairly to all clients simultaneously. **Option B: "this practice benefits all clients."** - This is a violation because even if the practice benefits clients (by catching errors), it still constitutes unfair treatment. Some clients (the fund managers) receive information earlier than others, giving them an unfair advantage. **Option C: "the long-standing client relationships are not disclosed."** - This is also a violation. The relationships themselves create a conflict of interest that should be disclosed to clients. Gretta's personal relationships with fund managers from her former employer create potential bias that clients should be aware of. ### Why Option A is Correct: Gretta violated Standard III(B) Fair Dealing by providing draft research to select clients before others. The fact that the report is a draft does not mitigate this violation - research reports contain material investment recommendations and analysis that must be distributed fairly to all clients. She also likely violated Standard I(B) Independence and Objectivity due to her personal relationships with the fund managers, and Standard V(A) Diligence and Reasonable Basis by relying on external parties to correct her research errors. ### Key Standards Violated: 1. **Standard III(B) Fair Dealing** - Selective disclosure of material information 2. **Standard I(B) Independence and Objectivity** - Undisclosed relationships creating bias 3. **Standard V(A) Diligence and Reasonable Basis** - Not ensuring research is accurate before distribution ### Correct Answer Rationale: The "draft" status of the report is irrelevant to the fairness issue - material information must be distributed fairly regardless of its draft status. Therefore, this is the LEAST likely reason she violated the Standards.
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Monique Gretta, CFA, is a research analyst at East West Investment Bank. Previously, Gretta worked at a mutual fund management company and has a long-standing client relationship with the managers of the funds and their institutional investors. Gretta often provides fund managers, who work for Gretta's former employer, with draft copies of her research before disseminating the information to all of the bank's clients. This practice has helped Gretta avoid several errors in her reports, and she believes it is beneficial to the bank's clients, even though they are not aware of this practice. Regarding her research, Gretta least likely violated the Standards because:
A
her report is a draft.
B
this practice benefits all clients.
C
the long-standing client relationships are not disclosed.