Are Reports from a Self-described “CFA Candidate” Valid?

Self-described "CFA Candidate" Authors Report on TSTS

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NOTE: Updates to this article are at the bottom of this post. There are three already and there might be more coming. Rather than creating a new page or post on this topic, we are simply going to do updates here. Please bookmark this page if you want to see further updates. 

 If you buy penny stocks for fun and entertainment, you have seen “research companies” in the smallcap arena. I have even owned half of a huge research firm in the earliest stages of its infancy before selling it out to the partner involved within a few months. I also republished research on a research site of mine when I found that research to be valid.  That seldom happened. I just didn’t like that kind of business. 

I am here today to talk about research that is coming out lately from a rather odd source. It is a self-described “CFA Candidate.”  I have seen the term “CFA Candidate” many times.  Usually it is on resumes when you are trying to hire people in finance jobs.   Maybe I was a “Medical Doctor Candidate” in my first year of college before I realized I hated biology?  My 11 year old son knows more about rocket science than most adults will ever know in their lifetimes. He has every intention of being a Rocket Scientist. He is certainly a “Rocket Scientist Candidate” in my opinion. 

The good news is that this CFA Candidate has passed the first CFA exam. Before we get into the lengthy, multiyear process it takes to even become a CFA let’s first talk about what a CFA really is. The person becomes a Charted Financial Analyst after a series of three exams. They have to even qualify to take the exams. Once they take and pass all three exams as prescribed by the CFA Institute then they may use the CFA designation. 

Here is the CFA Institute’s Mission Statement and its Vision Statement:

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Mission Statement

To lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society.


We aspire to a CFA Institute that:

  • Serves all finance professionals seeking education, knowledge, professional development, connection, or inspiration.
  • Leads the investment profession’s thinking in the areas of ethics, capital market integrity, and excellence of practice.


Now let’s look at what a fully credentialed CFA is supposed to include in a report: 

Here are the standards for reports authored by Chartered Financial Analysts.  I will give you the link to the full PDF document from which the quoted text below is taken. Do note that this is the entire section from “Issue Paid Research.”

Issuer Paid Research
A. When engaging in research paid for, directly or indirectly, by the corporate issuer, analysts must:
  1. Only accept cash compensation for their work and must not accept any compensation contingent on the content or conclusions of the research or the resulting impact on share price.
  2. Disclose in the report:
    • The nature and amount of the compensation received for drafting the report.
    • The nature and extent of any personal, professional, or financial relationship they, their firm or its parent, subsidiaries, agents, or trading entities may have with the subject company, its personnel, parent, subsidiaries, or agents.
    • Their credentials, including professional designations and experience that qualifies them to produce the report.
    • If it is a one-time report or if the analyst will provide continuing coverage. If the analyst provides continuing coverage, they must disclose how to obtain updates.
    • Any matters that could reasonably be expected to impair their objectivity in drafting the report.
    • History of recommendations for the subject-company and number and distribution of recommendations for all companies they cover.
  3. Certify that the analysis or recommendations contained in the report, if any, represent the true opinions of the author or authors.
  4. Refrain from engaging in, or receiving compensation from, any investment banking or corporate finance-related activities with the issuer.
  5. Ensure that the analyst(s) do not share information about the subject company or the timing of the release of a research report with any person who could have the ability to trade in advance of (“front run”) the release of a report.
  6. Refrain from trading in the shares of the subject company in advance of the release of a report or update.
  7. Refrain from trading in a manner that is contrary to, or inconsistent with, the employees’ or the firm’s most recent published recommendations or ratings, except in circumstances of unanticipated extreme financial hardship.
  8. Abide by all laws, rules, and regulations that apply to registered or regulated analysts.


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B. When hiring analysts to produce research for their company, corporate issuers must:
  1. Engage qualified analysts who are committed to producing objective and thorough research that fully discloses any matters that could reasonably be expected to impair their objectivity.
  2. Pay for the research in cash and only in a manner that does not influence or seek to influence the content and conclusions of the research.
  3. Not attempt explicitly or implicitly to influence the research, recommendations, or behavior of analysts or otherwise pressure analysts to produce research or recommendations favorable to the corporate issuer.
  4. Ensure that the disclosures required of the analyst in V(A.2) are included in the research report that are published or distributed, in whole or in part, by the corporate issuer.


The Research Analyst I am Speaking Of: 

I have decided not to use name her in this article as we do not want to single out one person. She is young and should not be damaged publicly at such a young age. We are concerned that anyone would hire and pay a non-qualified analyst to do such a report. This analyst is very young. She got her “Honour Bachelor of Art” in Canada 2014. Her jobs listed include a banking job started in February of this year.  Prior to that she lists three “summer” jobs at three finance related companies.  The one from 2013 was in Canada. The prior two were in Vietnam. One was described at a “Summer Analyst” at a bank job in Vietnam. The bank is an American company.  Another prior university is shown as well, also in Vietnam. That is from 2009. 


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A Couple of Questions: 

  1. Should this person be making recommendations on smallcap stocks? 
  2. Is she qualified to put out analysts reports having passed only the first of three exams?

That is subjective. Yes – anyone can write a report. Not just anyone is allowed to use the term CFA in a report, however, is not the watch dog agency for that. It would be the CFA Institute. Not our call. 


Here is what I have trouble with:

  • Someone hired this person as an “analyst.” 
  • Press releases were issued and write up’s were written around the findings in this person’s reports. 
  • None of those write-ups or press releases mentioned that the “analyst” is simply a CFA Candidate that has only completed one of three tests.

Did you know that the CFA Institute has published results showing only 38% of those that pass Level I ever go on to become a full CFA? It’s true as of 2009. Only 20% of those that sit (pass or fail) for the Level I exam ever become CFA’s. That is a 2014 stat. 


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I am going to use one report as a particular example: 

This press release announces the analyst’s report:

SmallCap IR Issues Analyst Brief on That Marketing Solution: Proprietary Formula gives Company Competitive Advantage by IEW Research (PR Newswire) READ THIS FULL RELEASE HERE

SmallCap IR suggests in the disclaimer they are merely “hosting” the report. This press release headline said they “issued” the report.  That is a huge difference. We don’t see any compensation mentioned anywhere on their website to suggest they were even paid for this.  We don’t know what the overt reason for even issuing this press release (which costs somewhere between $200 and $500 on PR Newswire typically). Sometimes IR companies simply jump on the bandwagon when a stock has a chart that has moved up as much as this one has.  Sometimes they forget. That can happen. They even say in every disclosure they are human, and we take them at their word on that. 

The press release contains a lot of positives that are no where to be found in the so-called analysts report.

What I mean by that, this press release comes across as a reason to BUY shares of stock.  That’s not what the analyst report really says. Note the report officially is suggesting an ever so neutral “hold” on the stock. That’s not in the press release, is it? No. 

Who paid for SmallCap IR to issue that? I am curious. Are you?

The truth is that maybe nobody could be the answer. It would make almost no sense to do such a full press release for a company that is not paying you. I am not going to suggest that they are holding shares and have put this out for that reason. I truly believe them on that. The reason I believe them on that is that anyone linked to putting out press release while selling shares would see a very serious hammer come down from the SEC, FINRA and possibly even the DOJ. 


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Did The Marketing Solution (the public company featured in the report) Authorize or Assist in the Report or the Press Release?

That’s a great question. 

Did you know that PR Newswire doesn’t just let anyone send a press release on their wire service with a random opinion of an analyst?  Generally speaking, other than the big brokers that do research on major stocks, an analyst company or a website cannot just issue a press release on PR Newswire about a stock using its ticker. Generally, the public company has to sign a waiver to allow a particular third party analyst or third party website to issue a press release using the public company’s ticker.  (No, this does not apply to all wire services.) 

I have dealt with PR Newswire over the years. I am familiar with their policies on that in general. Did The Marketing Solution give that permission to have this report featured by an analyst self-described as a “CFA Candidate?”  The answer could be no. 

Did the public company featured assist in the analyst’s report in any way? 

Sometimes analysts speak to management to get information for the report. That is the responsible thing to do. I have spoken to many CFA’s over the years. Most require direct company contact so they can make sure they get any clarifications they need. This “analyst” did not do a discounted cash flow analysis and did not set a target price on the stock. She really only cited what was public. 

A final question: 

What is IEW Research?

We find no information at all of them. It’s like they don’t exist, except they are issuing research. Odd, isn’t it. 

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Why do I bring this up?

Like with my article on MOU’s and LOI’s, I believe that the smallcap stock world needs to be cleaned up.  Everyone that has been around smallcap stocks know that these are basically just articles written to pump a stock.  The press releases that “announce” the research often have no factual information from the research report or research note. Again – they are pump press releases with little or no content cited from the so-called research report. 

Another part of this:

With all of the parties to such a thing as this, disclosures are kind of shady. Look at all of the potential parties to this one example:

  • The Analyst (or should we say “Analyst in Waiting” or “CFA Candidate)
  • IEW Research – Is this who paid the analyst? Was the analyst even paid for this?
  • The SmallCapIR website showing no money exchanged with anyone other than to pay $50 for the right to host the analysts report – as if they had nothing to do with the report.  Their press release headline says they “issued” the report. That is in contradiction with The Analyst and IEW Research if you look at it. 
  • PR Newswire. Someone paid them to run this press release. It is sourced as “Small Cap IR.”  
  • The public Company, The Marketing Solution (OTCQB: TSTS) – NOTE: They may never have know this was coming out. They may have never paid a dime.
  • Occasionally – A third party funds these reports. That would be instead of the public company featured. From my experience third parties only do so to either blow shares out (sell shares) or out of the kindness of their hearts.  The latter is kind of rare, so if it is a third party you can assume they want out. Some third parties work in concert with the public company to keep the public company out of it. A CEO might direct a third party to fund a report, and then replace the value of what that third party pays for it with shares or cash from the public company. That would likely not go well if the SEC came in and directed that transaction. 

Bottom Line: 

These reports are stupid. Even those authored by real CFA’s in the penny stock arena are trash. They are generally all pump pieces. 

We are doing a further investigation into the history of “research firms” and specific “CFA’s” that author reports. That will come out next week. 

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Update One: April 22, 2015


We asked the person we call the “CFA Candidate” to comment. Here is what she gave us: 

Thank you for reaching out. The reports we are doing have nothing with CFA institution, I started this before I did my first exam. I didn’t fail any part, in fact, I did really well on all parts. People who write report like this does not necessarily has to have CFA credential, they can do it as their own interest. Also, under the disclaimer part, we emphasized that investors should use the information at their discreet. I also did not put anything regarding to mine or my partner’s CFA status to our reports. 


(we have chosen to withhold the name)


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Update Two: April 23, 2015 


Dear John,

Many thanks for bringing this to our attention. Our Legal team has satisfactorily resolved this issue with Small Cap IR and has addressed with (name withheld by StockGuru) the misuse of CFA Institute trademarks and her improper use of her candidacy as a designation.


Sarah-Jane Purvis │ Manager, Global Media Relations │CFA Institute


We consider this settled. We have seen another person using “CFA Candidate” to write similar reports for the same IR company. We are not going to address that with the CFA Institute as we are confident that the other person using that designation will not be using that again. 

As stated above, these reports are being used to “pump stocks” with an analyst that does not have the full CFA title, yet CFA Candidate was used in the report as a designation. 


Update Three: April 23, 2015

First – Popular CFA’s and other penny stock “analysts” – An Informal Audit

Like mentioned above, we are doing research on the results of popular CFA’s  – AND – other “analysts” who have made recommendations on penny stocks in the past. We will have an initial report some time next week followed by an informal audit of penny stock recommendations done by such analysts.


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Second – Penny stock firms that use such analysts reports – An informal Audit, plus revealing untrue hype and statements made about reports that vary greatly from the content of the reports

We will also be auditing results of “research reports” published by penny stock IR firms when they claim to have engaged an “independent third-party.” We are not talking about penny stock IR companies that suggest reports are “independent” and are authored by “third parties.”  We are going to compare and contrast the statements they made in press releases with the statements made by their “independent analyst” in the reports. There are some incredibly gross misrepresentations. We are going to present those varying statements to those parties in advance of this report and offer those IR companies (more than one, of course) and the “analysts” (CFA or otherwise) a chance to challenge our interpretation of those statements.  We are going to also find out why one firm is issuing report after report and the amount compensated is no where to be found. 


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