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Case Studies
Research without in-depth quantitative analysis
Martin manages the research department of a securities company. On one business encounter, he meets Johnny who is the CEO of a listed company which engages in infrastructure development throughout Asia. Johnny tells Martin that his company is in the final stage of obtaining the bid for the building of a highway in a Southeast Asian country and the terms offered by the government concerned are very attractive. Johnny is optimistic that his company will make a huge profit from the project. Having arrived back at his office, Martin issues a research report stating that Johnny’s company will obtain the profitable construction contract and he recommends the purchase of its stocks.
Case Analysis
Martin violates the *Codes of Conduct by issuing a research report which is not based on thorough quantitative analysis. The information given in the report may prove to be false as Martin has recklessly turned Johnny’s subjective optimism in obtaining the construction contract into a certainty. Such carelessness may easily cause financial loss to investors.
*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.