Smithers is a financial analyst with XYZ Brokerage Company. She is preparing a purchase recommendation on JNI Corporation. Which of the following situations would represent a conflict of interest for Smithers and, therefore, would have to be disclosed?
I. Smithers is on a retainer as a consultant to JNI.
II. XYZ holds for its own account a substantial common stock position in JNI.
III. Smithers has material beneficial owners of JNI through a family trust.
IV. Smithers' brother-in-law is a supplier to JNI.
Click on the arrows to vote for the correct answer
A. B. C. D. E. F. G. H.B
This question pertains to Standard IV (B.7), Disclosure of Conflicts to Clients and Standard III (C), Disclosure of Conflicts to Employer. Statements I, II and III describe conflicts of interest for Smithers or for her firm that would have to be disclosed. Statement I describes an employment relationship between the analyst and the company subject to recommendation. Statement II describes the beneficial interest of the analyst's employer in the company's stock. Statement III describes the analyst's own beneficial interest in the company stock. In Statement IV, the relationship between the analyst and the company through a relative is so tangential that it does not create a conflict of interest necessitating disclosure.