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NEW QUESTION: 1
A. Option D
B. Option B
C. Option A
D. Option C
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NEW QUESTION: 2
Silverio Arvantis is an aggressive and quick-silver analyst with Foresi Associates, an investment advisory firm. Silverio, a freshly minted Ph.D. from the University of Chicago, recently formulated an algorithm for selecting the portfolio weights in relatively new high-tech stocks. The algorithm evaluates 43 different variables to choose the investments and as such, is fairly complex in nature. Not wishing to drown his clients in esoteric terms like "martingale" and "stochastic transformation," Silverio writes up a short report which touches only briefly on the major characteristics of the model. Instead, he focuses on the performance of the model on past market data, which is absolutely sterling. Based on these tests, Silverio recommends 4 stocks for immediate purchase. Silverio has:
A. violated Standard V (B) - Performance Presentation by relying on past data.
B. not violated any standards.
C. violated Standard IV (A.2) - Research Reports by failing to disclose sufficient details about the algorithm.
D. violated Standard IV (A.2) - Research Reports by failing to distinguish opinion from fact.
Standard IV (A.2) requires the member to disclose details of the reasoning and logic behind the recommendations so that investors can follow and challenge it and analyze the risks inherent in the recommended strategy. While Silverio does not have to delve into excessive technical details or reveal any proprietary formulas, the report must contain explanations for the recommendations. By omitting these, he has violated Standard IV (A.2). Note, however, that there is no evidence that he has confused opinion with fact.