Final answer:
Standard V(A): Diligence and Reasonable Basis addresses compensation, distribution, and reasonable basis in the context of investment advice and analysis. It involves ensuring fair remuneration, equitable allocation, and a rational basis for investment recommendations.
Step-by-step explanation:
Standard V(A): Diligence and Reasonable Basis is a guideline within the Code of Ethics for investment professionals set by the CFA Institute. It addresses the issues of compensation, distribution, and reasonable basis in the context of investment advice and analysis.
Compensation refers to the methods of remuneration that investment professionals receive for their services. Distribution refers to the fair and equitable allocation of investment opportunities among clients, ensuring that no client is disadvantaged. Reasonable basis refers to the need for investment professionals to have a sufficient and rational basis for making investment recommendations.
An example of the application of these principles would be an investment advisor recommending a certain stock to a client. The advisor would need to ensure they have done diligent research, have a reasonable basis for their recommendation, and that the compensation they receive is fair and disclosed to the client.