Question

An investment management firm has been hired by ETV Corporation to work on an additional public offering for the company. The firm's brokerage unit now has a "sell" recommendation on ETV, but the head of the investment banking department has asked the head of the brokerage unit to change the recommendation from "sell" to "buy." According to the Standards, the head of the brokerage unit would be permitted to:a. Increase the recommendation by no more than one increment (in this case, to a "hold" recommendation).b. Place the company on a restricted list and give only factual information about the company.c. Assign a new analyst to decide if the stock deserves a higher rating.

Answer 1

Answer:

b. Place the company on a restricted list and give only factual information about the company.

Explanation:

There is an ethical problem in the scenario that borders on professional code of conducts in the area of objectivity and independence.

It was stated in the scenario that ''the head of the investment banking department has asked the head of the brokerage unit to change the recommendation from "sell" to "buy."

This is a case of wanting to interfere with the objectivity of the recommendations which should be based on facts not bias.

Secondly, the head of investment banking is trying to interfere with the independence of the head of brokerage unit.

According to the Standards, the head of the brokerage unit would be permitted to place the company on a restricted list and give only factual information about the company.