Diligence

Exam items dramatize the reasonable-basis test: an analyst issues a recommendation while skipping a step — leaning on a colleague’s report, a third-party model, or a quant screen without sampling the inputs. The tell is whether this basis was adequate given the recommendation’s complexity, not whether the research was exhaustive. When relying on others’ work, members must judge the source sound and reasonable (its objectivity, assumptions, limitations); blind reliance violates V(A). On group research, watch the reverse trap: mere disagreement does not force you off the report — keep your name on it if the conclusions rest on a reasonable basis; request removal only when that basis is unsound.

The classic confusion is V(A) versus III(C) Suitability: diligence governs whether the analysis is well-founded; suitability governs whether the recommendation fits the client. A rigorously researched call can still be unsuitable, and a suitable one poorly researched — different standards, independent tests. Don’t conflate it with I(D) Misconduct either: sloppy analysis is a diligence failure, not dishonesty unless deceit enters. Memory hook: basis before recommendation.