Appropriate records can help you out of a sticky situation

YOUR client calls. Julia expresses her firm's disappointment with a buy recommendation you made that her team acted upon. The stock price of a precision engineering company which your client invested in fell 20 per cent. Julia wants an explanation on how you as the sell-side analyst had arrived at a recommendation to accumulate the shares of a Vietnam-based engineering company.

You reiterate over the call that the Hanoi-based company managed to put in place the latest state-of-the-art production machines to start volume production of the next generation of drives. And you made the due diligence trip to the production plant and spoke to the management of the company to ascertain that once production commences, the output would improve make-quality significantly and lower unit costs of production by at least 6 per cent.

This will give the company a competitive edge in securing contract manufacturing business from technology brands. Julia says she tentatively accepts the explanation and will be over to meet you in-person for further clarification. You prepare the documentation and records to support your independent and reasonable basis in issuing the strong buy call.