What are the CFA Standards requirements for research reports, and what must be disclosed versus recommended?

CFA Institute Standards require research reports to have a reasonable and adequate basis, distinguishing fact from opinion, and including all material disclosures. The requirements apply to both sell-side and buy-side analysts, though the audience and format differ.\n\nStandard V(A) - Diligence and Reasonable Basis:\n\nEvery recommendation must rest on thorough research and analysis. You must:\n- Exercise diligence, independence, and thoroughness\n- Have a reasonable and adequate basis for conclusions\n- Distinguish between fact and opinion in the report\n\nStandard V(B) - Communication with Clients:\n\nReports must disclose:\n- The basic format and general principles of the investment process\n- Factors important to the analysis and significant limitations\n- Changes in methodology or models from prior reports\n- Risk factors relevant to the investment\n\nRequired Disclosures:\n\n| Element | Requirement | Standard |\n|---|---|---|\n| Conflicts of interest | Must disclose all material conflicts | VI(A) |\n| Beneficial ownership | Disclose if analyst/firm owns the security | VI(A) |\n| Compensation tied to recommendations | Must disclose | VI(A) |\n| Investment banking relationships | Must disclose if firm has a relationship | VI(A) |\n| Fact vs. opinion distinction | Must clearly separate | V(B) |\n| Price targets and time horizons | Should specify | V(B) |\n| Risk factors | Must identify key risks | V(B) |\n\nWorked Scenario:\n\nAnalyst Rochelle at Dunmore Securities writes a buy report on Blackthorn Energy. Her compliance checklist:\n\n1. Reasonable basis: She has analyzed 3 years of financial statements, conducted management interviews, built a DCF model, and compared against 4 industry peers. (Satisfies V(A))\n\n2. Fact vs. opinion: Revenue grew 12% last year (fact). She expects 15% growth next year based on pipeline expansion (opinion). These must be clearly distinguished.\n\n3. Disclosures: Dunmore's investment banking arm underwrote Blackthorn's recent bond issue. Rochelle personally owns 500 shares. Both must be disclosed prominently.\n\n4. Limitations: Her model assumes stable oil prices at $72/barrel. She must note that commodity price sensitivity is a significant limitation.\n\n5. Changes: Her previous report used 10% WACC; she now uses 9.2% due to updated debt costs. She must note and explain this change.\n\nSell-Side vs. Buy-Side Differences:\n\n- Sell-side reports are distributed to external clients and face stricter regulatory requirements (FINRA, MiFID II) beyond CFA Standards\n- Buy-side reports are internal and may be less formal but still must maintain the same ethical standards\n- Both must have reasonable basis and disclose conflicts\n\nCommon Exam Violations:\n- Copying a recommendation from another analyst without independent verification\n- Relying on a single factor (e.g., only P/E ratio) as the basis for a recommendation\n- Failing to disclose a material conflict of interest\n- Presenting opinion as fact\n\nStudy ethics standards comprehensively in our CFA Ethics course.