A member uses a non-public rumor as the basis for a recommendation to a client.

• A. Standard VII.A Conduct as a CFA Institute Member or Candidate
• B. Standard V.A Diligence and Reasonable Basis
• C. Standard I.C Misrepresentation
• D. Code of Ethics and Standards

Answer: (B)

The main idea here is that recommendations must be grounded in solid, verified analysis. Relying on a non-public rumor means the basis for the client’s advice isn’t backed by reliable research or evidence, which fails the standard that requires a reasonable, well-supported basis for any recommendation. If the information is unverified or could be false, the advisor has not demonstrated due diligence and could mislead the client or incur liability. The Code and Standards provide overarching ethical guidance, and while conduct and truthfulness matter, the specific requirement most directly violated is the need for diligence and a reasonable basis for investment recommendations.