Senior Members' Approach to Negative Information

C

"Procedures for Compliance," Standard IV (A.3)

In this scenario, the question is addressing the situation where the senior members of an investment advisory firm are unwilling to share negative information about a firm. The question asks what the advisory should do in this case. Let's go through each answer choice to determine the most appropriate course of action:

A. None of these answers: This answer suggests that none of the given options is the correct course of action. However, it does not provide an alternative solution.

B. Refrain from making an investment recommendation citing proprietary reasons: This answer suggests that the advisory firm should withhold making an investment recommendation, citing proprietary reasons as the rationale. Essentially, they would avoid giving any opinion on the investment, which might be perceived as negative. This option is not ideal because it does not address the underlying issue of withholding negative information. It does not provide transparency to clients and may compromise the integrity of the advisory firm.

C. Disseminate only factual information about the firm and refrain from making any research comments: This answer suggests that the advisory firm should only provide factual information about the firm, without making any research comments. While this option emphasizes the importance of factual information, it does not address the concern of withholding negative information. It may still lack transparency and fail to provide clients with a comprehensive view of the firm.

D. Release the report without the negative information: This answer suggests that the advisory firm should release the report without including the negative information. This option is not recommended because it involves omitting important information that could potentially impact investment decisions. Withholding negative information can mislead clients and compromise their ability to make informed investment choices.

Given the options provided, none of them offer an ideal solution. However, the closest option to addressing the issue while maintaining transparency and integrity is option C: disseminating only factual information about the firm and refraining from making any research comments. Although it is not a perfect solution, it prioritizes providing accurate information to clients. It is crucial, however, for the advisory firm to review their policies and consider addressing the underlying issue of the unwillingness to disseminate negative information to ensure they maintain transparency and act in the best interests of their clients.