Diligence and Thoroughness

B

Standard IV (A.1) - Reasonable Basis and Representations states: "Members shall exercise diligence and thoroughness in making investment recommendations or in taking investment actions."

The correct answer is A. III B.

The AIMR (Association for Investment Management and Research), now known as CFA Institute, has established a set of ethical and professional standards for financial analysts. These standards, known as the AIMR Standards, provide guidelines for conduct and practice within the investment industry.

Standard III B of the AIMR Standards specifically addresses the diligence and thoroughness required of financial analysts when making investment recommendations or taking investment actions. This standard is titled "Fair Dealing" and emphasizes the importance of acting in a diligent and thorough manner to ensure the best interests of clients are served.

Under Standard III B, financial analysts are expected to exercise reasonable care and judgment when conducting investment analyses and making recommendations. This includes:

1. Gathering Sufficient Information: Analysts should collect and analyze all relevant information that could reasonably be expected to affect the investment recommendation or decision.

2. Ensuring Accuracy and Completeness: Analysts should strive to ensure that the information used in their analyses is accurate, complete, and reliable. They should critically evaluate the quality and reliability of the data and information sources.

3. Conducting Reasonable Investigation: Analysts should conduct a reasonable investigation to verify the accuracy of factual information and to identify any conflicts of interest that might compromise the objectivity or independence of the recommendation.

4. Thoroughness of Analysis: Analysts should employ thorough and comprehensive analysis techniques to evaluate investments. They should consider all relevant factors, including risks and potential rewards, and take into account any specific client constraints or objectives.

Overall, Standard III B emphasizes the importance of diligence and thoroughness in the investment analysis process to ensure the integrity and credibility of the recommendations or actions taken by financial analysts.