Securities Industry Regulator: Brokerage “Buy” ratings are suffering from a credibility gap. There is a far greater proportion of “Buy” ratings than “Sell” ratings. In fact, 80% of all major financial institution’s ratings are “Buy” ratings. Given that inflated volume of “Buy” ratings, it’s hard to trust the quality of those ratings, and equally challenging to take them seriously. Even the simple act of reducing a financial institution’s analysis to just “Buy”, “Hold”, or “Sell” is dubious since a company’s financial outlook is typically quite complex. Accordingly, a financial institution’s investment rating is rendered almost meaningless.

If the Securities Industry Regulator’s statements are true, then which of the following must be true?


A. An investor can only profit from an investment if he or she confirms the merits of a company’s financial future.

B. A “Buy” rating does not guarantee that a given company will have a strong financial future.

C. Financial institutions should refrain from issuing “Buy” ratings.

D. The ability of a company to earn a “Buy” rating has become easier than ever before.

E. Increasingly, financial institutions are issuing meaningless investment ratings.



OA B

Source: EMPOWERgmat