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Series 16 study materials
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Series 16 practice questions

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Question 1Preparation and Review of Research Reports

Which FINRA rule establishes the requirements for the preparation, content, and distribution of equity research reports?

  1. Rule 2210
  2. Rule 3110
  3. Rule 2241 Correct answer.
  4. Rule 2242

Explanation

Rule 2241 is the FINRA rule governing research analysts and equity research reports, including conflict management, disclosures, and supervisory review. Rule 2242 addresses debt research, Rule 2210 governs communications with the public generally, and Rule 3110 addresses supervision.

Question 2Preparation and Review of Research Reports

Under Regulation AC, a research report must include an analyst certification stating that:

  1. The price target represents a guaranteed minimum return over the next twelve months
  2. The member has provided no investment banking services to the subject company in the past twelve months
  3. The analyst holds no position in the securities of the subject company
  4. The views are the analyst's own and compensation is not tied to the specific recommendations Correct answer.

Explanation

Regulation AC requires the analyst to certify that the views expressed accurately reflect the analyst's personal views and that no part of the analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views in the report.

Question 3Preparation and Review of Research Reports

Which statement about compensating equity research analysts is consistent with FINRA Rule 2241?

  1. Compensation may not be based on specific investment banking transactions or contributions to investment banking business. Correct answer.
  2. Compensation must be based solely on the historical accuracy of the analyst's prior ratings.
  3. Compensation may be based on the profitability of specific investment banking transactions the analyst helped solicit.
  4. Compensation may be set by investment banking managers who are familiar with the analyst's ratings.

Explanation

Rule 2241 prohibits tying analyst compensation to specific investment banking transactions or to contributions to the member's investment banking business, and it bars investment banking personnel from directing analyst compensation.

Question 4Preparation and Review of Research Reports

A member's research report must disclose whether the member has received compensation for investment banking services from the subject company during which period?

  1. The past 6 months
  2. The past 24 months
  3. The past 12 months Correct answer.
  4. The past 9 months

Explanation

Rule 2241 requires disclosure of investment banking compensation received from the subject company in the past 12 months, together with whether the member expects to receive or intends to seek such compensation in the next 3 months.

Question 5Preparation and Review of Research Reports

A member beneficially owns 2% of a class of common equity securities of a company it covers. What does Rule 2241 require?

  1. The report must disclose only the dollar value of the position
  2. The report must disclose that the member owns 1% or more of that class Correct answer.
  3. The member must sell the position before publishing the report
  4. No disclosure is required because the stake is below 5%

Explanation

Research reports must disclose whether the member or any affiliate beneficially owns 1% or more of any class of common equity securities of the subject company, so a 2% stake triggers disclosure.

Question 6Preparation and Review of Research Reports

A member's research reports must explain:

  1. The average rating assigned to all covered companies
  2. The identity of the investment bankers who approved each rating
  3. The meaning of each rating the member uses Correct answer.
  4. The number of reports issued in each calendar quarter

Explanation

Rule 2241 requires that reports clearly explain the meaning of each rating the member uses so that readers can understand what a buy, hold, or sell designation actually signifies. Ratings must also be applied consistently with those definitions.

Question 7Preparation and Review of Research Reports

Before a member may publish an equity research report, the report must be:

  1. Filed with FINRA at least 10 days in advance
  2. Approved by a member of the investment banking department
  3. Approved by a supervisory analyst or other qualified registered principal Correct answer.
  4. Reviewed by the subject company for accuracy

Explanation

Rule 2241 requires that a supervisory analyst or another qualified registered principal review and approve a research report before it is published, confirming that it is accurate, balanced, and contains the required disclosures.

Question 8Preparation and Review of Research Reports

Which conduct is prohibited for a member's research analyst?

  1. Publishing a report that discloses a conflict of interest
  2. Offering a favorable rating to a prospective client to win investment banking business Correct answer.
  3. Issuing a sell rating on a company that is an investment banking client
  4. Declining to cover a company whose management will not meet with the analyst

Explanation

Rule 2241 forbids members and their personnel from directly or indirectly promising favorable research, a specific rating, or a specific price target as an inducement to obtain business.

Question 9Preparation and Review of Research Reports

An analyst who covers Acme Corp. personally owns 500 shares of Acme in a brokerage account. What is required when her report on Acme is published?

  1. The analyst must transfer the shares to a blind trust
  2. The report may be published only if the analyst sells the shares within 30 days
  3. The report must disclose the analyst's financial interest in the subject company Correct answer.
  4. No action is required as long as the holding is below 1% of Acme's shares outstanding

Explanation

Rule 2241 requires disclosure of whether the research analyst or a member of the analyst's household has a financial interest in the securities of the subject company, and the nature of that interest.

Question 10Preparation and Review of Research Reports

A member's investment banking director asks a research analyst to postpone a planned downgrade until a pending underwriting closes. The analyst should:

  1. Postpone the downgrade, because investment banking business supports the research department
  2. Refer the request to the subject company's management for approval
  3. Publish on schedule, because investment banking personnel may not control research timing or content Correct answer.
  4. Publish a report that omits any rating until the offering closes

Explanation

Rule 2241 prohibits investment banking personnel from directing the timing or content of research and bars retaliation against analysts who issue unfavorable views. Delaying a rating change to accommodate a deal is improper influence.

Question 11Preparation and Review of Research Reports

When a research report includes a price target, Rule 2241 requires disclosure of:

  1. The identity of the institutional clients who received the target first
  2. The valuation method used to derive the target and the risks that could prevent its achievement Correct answer.
  3. The exact date on which the target will be met
  4. The analyst's expected holding period for the member's proprietary account

Explanation

When a rating or price target is included, the report must explain the meaning of the rating, the method used to determine the price target, and the risks that may impede achievement of the target.

Question 12Preparation and Review of Research Reports

A member distributes to its customers a research report prepared by an unaffiliated research firm. The member must:

  1. Remove the third party's name so customers rely on the member's own judgment
  2. Refrain from distributing the report to retail customers
  3. Guarantee the accuracy of the third party's ratings
  4. Identify the third party as the source and not present the report as its own Correct answer.

Explanation

Research obtained from an unaffiliated provider must be attributed to that provider and may not be passed off as the member's own work; the member must also ensure that what it distributes is not misleading.

Question 13Preparation and Review of Research Reports

A member received a fee from a subject company during the past 12 months for services unrelated to investment banking, such as retirement plan administration. The research report must:

  1. Disclose the compensation for non-investment banking services received in the past 12 months Correct answer.
  2. State that no conflict exists because the fee was not for underwriting
  3. Be approved by the subject company before distribution
  4. State that the fee did not exceed the annual research budget

Explanation

Rule 2241 requires disclosure of whether the member or an affiliate received compensation from the subject company during the past 12 months for products or services other than investment banking services.

Question 14Preparation and Review of Research Reports

For how long must a member retain records of its research reports and the required disclosures?

  1. 1 year
  2. 3 years Correct answer.
  3. 5 years
  4. 6 years

Explanation

Research reports and related records must be preserved for 3 years, generally with the first 2 years maintained in an easily accessible place, consistent with the recordkeeping standards applicable to member books and records.

Question 15Preparation and Review of Research Reports

A research analyst is interviewed on a financial news program about a company she covers and in which she owns shares. The analyst must:

  1. Decline to appear unless the subject company approves
  2. Make no disclosure, because public appearances are exempt from conflict disclosure
  3. Disclose the ownership only if asked directly by the interviewer
  4. Disclose the ownership interest in the securities of the subject company during the appearance Correct answer.

Explanation

When an analyst discusses a subject company in a public appearance, conflicts of interest known to the analyst, including ownership of the company's securities, must be disclosed in that appearance.

Question 16Preparation and Review of Research Reports

Which reporting arrangement is consistent with FINRA Rule 2241?

  1. Analysts report to research management, not to investment banking. Correct answer.
  2. Research analysts report to the syndicate desk.
  3. Research analysts report to the head of investment banking.
  4. Research analysts report to the corporate finance department's managing director.

Explanation

Rule 2241 requires that research analysts not be subject to the direction or supervision of investment banking personnel; reporting lines must run through research management so that research remains independent.

Question 17Preparation and Review of Research Reports

Rule 2241's anti-retaliation provision protects a research analyst who:

  1. Refuses to attend required compliance training sessions
  2. Issues an unfavorable rating or negative view on a company that is an investment banking client Correct answer.
  3. Shares draft reports with the subject company before publication
  4. Trades in securities of companies he covers without pre-clearance

Explanation

Members may not retaliate against research analysts for issuing unfavorable research or for having negative views about a subject company that is or may become an investment banking client.

Question 18Preparation and Review of Research Reports

If a member makes a market in the securities of a company covered in its research report, the report must:

  1. Disclose the member's inventory position in dollar terms daily
  2. State that the member will cease market-making activity
  3. Disclose that the member makes a market in those securities Correct answer.
  4. Omit any rating until market-making ceases

Explanation

Rule 2241 requires disclosure of whether the member makes a market in the securities of the subject company, because that activity can create a conflict with the recommendation.

Question 19Preparation and Review of Research Reports

A research report must disclose whether the research analyst received compensation based on:

  1. The analyst's years of experience
  2. The number of reports the analyst published
  3. The trading volume in the subject company's securities
  4. The member's investment banking services transactions Correct answer.

Explanation

In addition to the analyst's Regulation AC certification, the report must disclose whether the analyst's compensation was based on the member's investment banking services transactions, since that bears on objectivity.

Question 20Preparation and Review of Research Reports

How must a member structure the body that determines research analyst compensation?

  1. As a committee that includes senior management not engaged in investment banking Correct answer.
  2. As a committee of the firm's largest institutional clients
  3. As a committee of the subject companies' investor relations officers
  4. As an investment banking committee chaired by the head of underwriting

Explanation

Rule 2241 requires a formal compensation committee that includes senior management representatives who are not engaged in investment banking, so that pay decisions are insulated from deal pressures.

Question 21Preparation and Review of Research Reports

A member rates 50 subject companies: 25 Buy, 15 Hold, and 10 Sell. It provided investment banking services in the past 12 months to 10 of the Buy-rated companies and none of the others. Which disclosure is accurate?

  1. 50% of subject companies are rated Buy, and 10% of all subject companies are investment banking clients
  2. 50% are rated Buy, and 40% of Buy-rated companies are investment banking clients Correct answer.
  3. 25% of subject companies are rated Buy, and 10% of the Buy-rated companies are investment banking clients
  4. 40% of subject companies are rated Buy, and 50% of the Buy-rated companies are investment banking clients

Explanation

The rule requires disclosure of the percentage of all subject companies in each rating category and, within each category, the percentage for which the member provided investment banking services in the past 12 months. Here 25 of 50 companies are Buy-rated (50%), and 10 of those 25 Buy-rated companies are investment banking clients (40%).

Question 22Preparation and Review of Research Reports

While reviewing a draft report, a supervisory analyst finds that the summary states the issuer 'is certain to double its market share next year,' a conclusion the analyst's notes do not support. The supervisory analyst should:

  1. Approve the report after adding a disclosure that the claim is an opinion
  2. Approve the report because the analyst is responsible for the substance of the report
  3. Require the unsupported claim to be removed or revised before approving the report Correct answer.
  4. Forward the draft to the subject company to verify the claim

Explanation

Approval signifies that the report is accurate, balanced, and supported by a reasonable basis. An unsupported certainty claim is misleading and must be corrected or deleted before sign-off; a disclaimer does not cure an unsupported statement.

Question 23Preparation and Review of Research Reports

An analyst learns from a colleague, before publication, that the firm will downgrade a company the next morning. The analyst buys put options on that company. This conduct is:

  1. Acceptable if the analyst discloses the trade to compliance within 30 days
  2. Prohibited, because the analyst misused confidential information about a pending rating change Correct answer.
  3. Acceptable because the downgrade will soon be public
  4. Acceptable because analysts are exempt from trading restrictions on covered companies

Explanation

A pending rating change is confidential firm information; trading on it, directly or through options, is a misuse of nonpublic information and violates firm trading restrictions and the antifraud provisions.

Question 24Preparation and Review of Research Reports

By signing off on a research report, the supervisory analyst attests that the report:

  1. Has been reviewed and approved by the subject company
  2. Is accurate and contains no untrue statement of material fact Correct answer.
  3. Will produce the price target stated in the report
  4. Reflects the investment banking department's expectations for the issuer's performance

Explanation

The supervisory analyst's signature attests that the report is factually accurate, contains no untrue statement of material fact, and does not omit material facts needed to keep it from being misleading. This is a personal attestation, not a ratification of the issuer's or bankers' views.

Question 25Preparation and Review of Research Reports

A member publishes a report recommending the high-yield bonds of an issuer. Which rule principally governs the report?

  1. Rule 2242, which governs debt research reports Correct answer.
  2. Rule 3110 only, because debt research is supervised but unregulated as to content
  3. Rule 2210 only, because debt research is not covered by a research rule
  4. Rule 2241, because all fixed-income research is treated as equity research

Explanation

Rule 2242 governs debt research reports, imposing conflict-management and disclosure requirements that differ in several respects from the equity research regime in Rule 2241. Equity securities research is covered by Rule 2241.

Question 26Preparation and Review of Research Reports

Which communication falls outside the definition of a research report for purposes of FINRA Rule 2241?

  1. A note recommending a stock with a new price target
  2. A commentary on broad market and economic conditions Correct answer.
  3. An analysis of a single issuer's earnings outlook
  4. A report rating an issuer's common stock as a Buy

Explanation

Rule 2241 carves out communications limited to broad-based index discussion, economic or market commentary, technical analysis of supply and demand, and statistical summaries. These items contain no issuer-specific analysis or recommendation, so they are not research reports.

Question 27Preparation and Review of Research Reports

A member's research report assigns a Buy rating to a company. What must the report disclose about that rating?

  1. The number of clients who received the rating first
  2. The definition of the rating and the time horizon it covers Correct answer.
  3. The identity of the banker who reviewed the rating
  4. The analyst's expected portfolio weighting for the stock

Explanation

Where a report uses a rating system, the member must explain what each rating means and the time period on which it is based. Without that context a reader cannot tell what a Buy rating actually signifies.

Question 28Preparation and Review of Research Reports

Which statement must appear in a research report regarding the analyst's views and compensation?

  1. The analyst's pay is set solely by the investment banking division
  2. The analyst owns no securities of any issuer named in this report
  3. The views are the analyst's own and pay was not tied to this call Correct answer.
  4. The member guarantees the accuracy of the analyst's estimates

Explanation

A report must state that the views expressed accurately reflect the analyst's personal views and that no part of the analyst's compensation was, is, or will be tied to the specific recommendation. The statement addresses both independence of judgment and independence of pay.

Question 29Preparation and Review of Research Reports

Which practice must a member's policies prohibit for research analysts?

  1. Holding personal accounts at a discount brokerage firm
  2. Owning shares of an issuer outside the analyst's coverage
  3. Holding diversified mutual funds inside a retirement account
  4. Trading a covered stock against the analyst's own recommendation Correct answer.

Explanation

Conflicts rules require policies that bar analysts from trading in a manner inconsistent with their published views on securities they cover. Trading against one's own recommendation undermines the integrity of the research.

Question 30Preparation and Review of Research Reports

Where must a member's required conflict disclosures appear in connection with a research report?

  1. In the member's annual audited financial statements
  2. In the research report itself, clearly presented Correct answer.
  3. In a separate letter mailed to clients on request
  4. On the member's public website only, by reference

Explanation

Required disclosures must accompany the report and be presented clearly so that a reader sees them at the same time as the recommendation. Disclosures located elsewhere do not satisfy the rule.

Question 31Preparation and Review of Research Reports

FINRA Rule 2241 requires a member to adopt written policies and procedures reasonably designed to do what?

  1. Guarantee the performance of recommended securities
  2. Identify and manage conflicts of interest in research Correct answer.
  3. Eliminate all research coverage of investment banking clients
  4. Route all analyst communications through investment banking

Explanation

Rule 2241 requires written policies and procedures reasonably designed to identify and manage conflicts of interest between research and other business units. The goal is management of conflicts, not elimination of coverage.

Question 32Preparation and Review of Research Reports

Which standard governs the substance of the analysis in a research report?

  1. The issuer must be given a chance to review it before release
  2. It must include a rating for every issuer that the member covers
  3. The sales desk must approve the recommendation before distribution
  4. It must be fair and balanced, with a reasonable basis Correct answer.

Explanation

Rule 2210 requires research to be based on principles of fair dealing and good faith and to provide a sound basis for evaluating the facts. Material facts may not be omitted, and the recommendation must rest on a reasonable basis.

Question 33Preparation and Review of Research Reports

An analyst's spouse owns shares of a company the analyst covers. What does Rule 2241 require?

  1. Obtain written consent from the subject company
  2. Divest the shares within 30 days of publication
  3. Transfer the account to a blind trust before publishing
  4. Disclose the household ownership in the research report Correct answer.

Explanation

Ownership by a member of the analyst's household is treated as the analyst's conflict and must be disclosed in the report. Disclosure lets readers weigh the potential bias.

Question 34Preparation and Review of Research Reports

Before publication, investment banking staff review a draft report that downgrades a client. What is permissible?

  1. They may rewrite the price target to match their forecast
  2. They may replace the rating with one approved by the client
  3. They may delete the downgrade if it jeopardizes the deal
  4. They may point out factual errors, and only factual errors Correct answer.

Explanation

Pre-publication review by investment banking personnel is limited to checking factual accuracy and identifying misstatements. They may not influence the rating, price target, or conclusion, because that would compromise the independence of the research.

Question 35Preparation and Review of Research Reports

Which action by investment banking personnel is prohibited under Rule 2241?

  1. Providing input on factual statements about a pending offering
  2. Reading a published report after it has been distributed
  3. Receiving the same research that clients receive
  4. Directing the analyst to change coverage or a recommendation Correct answer.

Explanation

Investment banking personnel may not direct the analyst's coverage decisions or the substance of a recommendation. Factual input before publication and receipt of already published research are permissible.

Question 36Preparation and Review of Research Reports

Which arrangement is prohibited by FINRA Rule 2241?

  1. Charging institutional clients a fee for research content
  2. Promising a favorable rating to win an underwriting mandate Correct answer.
  3. Declining to publish research on a company at the analyst's request
  4. Producing research on issuers in which no banking business exists

Explanation

A member may not offer favorable research, a specific rating, or a particular price target as consideration for investment banking business. Doing so makes the research a sales tool rather than an independent opinion.

Question 37Preparation and Review of Research Reports

The analyst who prepared a report serves on the subject company's advisory board. What must the member do?

  1. Disclose the advisory board role in the report Correct answer.
  2. Resign the board seat within ten business days
  3. Assign the report to an uninvolved junior analyst
  4. Suspend all coverage of the company until year end

Explanation

A position as an officer, director, or advisory board member of a subject company held by the analyst or a household member is a disclosable conflict. The disclosure alerts readers to the relationship.

Question 38Preparation and Review of Research Reports

A member requires legal staff to monitor meetings between research analysts and bankers working on a transaction. This arrangement is best described as:

  1. Mandatory for every research report under Rule 2210
  2. An unlawful barrier to internal communications
  3. A chaperoning procedure that manages research conflicts Correct answer.
  4. A substitute for the supervisory analyst's review

Explanation

Chaperoning keeps investment banking personnel from improperly influencing research while still allowing legitimate factual exchange. It is a conflict-management tool required in substance by the research rules.

Question 39Preparation and Review of Research Reports

Who must approve a research report before it is published?

  1. A registered representative assigned to the largest client
  2. The issuer's investor relations officer
  3. A qualified supervisory analyst outside investment banking Correct answer.
  4. The head of the investment banking division

Explanation

Reports must be reviewed and approved before distribution by a qualified supervisory analyst who is independent of the investment banking function. This review covers adequacy of the basis for the recommendation and accuracy of the content.

Question 40Preparation and Review of Research Reports

A subject company is placed on the member's restricted list because of a pending offering. What should happen to a new report on the company?

  1. Publication should proceed with the conflict omitted
  2. Publication should be withheld until the restriction is lifted Correct answer.
  3. Publication may proceed if the analyst waives disclosure
  4. Publication may proceed if the rating is a Hold or Sell

Explanation

The restricted list exists to prevent research from being published while the firm is in possession of, or is working on, sensitive transaction information. Publication resumes only when the restriction is removed.

Question 41Preparation and Review of Research Reports

A member posts a research summary containing a rating on a social media account. What applies?

  1. No disclosure is required because the post is brief
  2. It is exempt from supervisory review once posted
  3. Only the member's social media policy applies
  4. It is treated as a research report, with all related rules Correct answer.

Explanation

The medium of delivery does not change the nature of the communication. A rating on social media is a research report, so the disclosure, supervision, and approval requirements apply just as they do to a printed report.

Question 42Preparation and Review of Research Reports

An analyst tells a large client that a downgrade will be published tomorrow. This conduct is:

  1. Acceptable if the analyst has no personal position in the stock
  2. Permitted for institutional clients but not retail customers
  3. Prohibited because it selectively discloses a pending rating change Correct answer.
  4. Acceptable if the client agrees to keep it confidential

Explanation

Pending ratings and recommendations are confidential until publication. Pre-releasing them to selected clients gives those clients an improper advantage and breaches the member's information controls.

Question 43Preparation and Review of Research Reports

An analyst initiates coverage using only the issuer's public filings and no management contact. Under Rule 2241, this is:

  1. Prohibited, because the issuer may dispute the estimates
  2. Permitted, if the resulting analysis has a reasonable basis Correct answer.
  3. Permitted, only if the rating assigned is a Hold or Sell
  4. Prohibited, because management contact is required for initiation

Explanation

The rules do not require an analyst to meet with management; they require a reasonable basis for the recommendation. Public filings can supply that basis if the analysis is sound.

Question 44Preparation and Review of Research Reports

An analyst's spouse is the chief financial officer of a company the analyst covers. What is the appropriate response?

  1. The analyst may publish if the spouse recuses from decisions
  2. The analyst may publish if the spouse's role is disclosed
  3. The analyst should not publish research on that company Correct answer.
  4. The analyst may publish if the rating is reviewed by the spouse

Explanation

An immediate family relationship with a senior officer of a covered issuer is a conflict so direct that disclosure cannot reasonably manage it. The analyst should be removed from coverage of that company.

Question 45Preparation and Review of Research Reports

What must a report disclose about the member's investment banking relationship with the subject company?

  1. The amount of the underwriting fee paid to the member
  2. The names of the bankers assigned to the account
  3. The member's profit margin on the transaction
  4. Whether it intends to seek banking business from the issuer Correct answer.

Explanation

Required disclosures include whether the member has managed or co-managed an offering, received investment banking compensation in the past twelve months, or expects to receive or intends to seek such compensation in the next three months. Fee amounts and internal staffing are not part of the disclosure.

Question 46Preparation and Review of Research Reports

A member was the managing underwriter of an issuer's initial public offering. How long after the offering must it refrain from publishing research on that issuer?

  1. 10 days after the offering date
  2. 90 days after the offering date
  3. 40 days after the offering date Correct answer.
  4. 25 days after the offering date

Explanation

A managing underwriter may not publish research on an issuer for 40 days following an initial public offering, subject to limited exceptions. The shorter 10-day period applies to secondary offerings, and the 25- and 90-day figures are not part of the rule.

Question 47Preparation and Review of Research Reports

Which activity must a research analyst avoid regarding an investment banking transaction?

  1. Joining a road show presentation to solicit investor interest Correct answer.
  2. Reading the offering memorandum for background
  3. Discussing industry trends privately with bankers
  4. Explaining an already published rating to a client

Explanation

Analysts may not perform investment banking duties, such as soliciting business or participating in road shows and pitches. Allowing analysts to help sell a deal ties their research to the transaction's success.

Question 48Preparation and Review of Research Reports

A draft report states that a company's margins will expand sharply, citing only one unnamed contact. The supervisory analyst should:

  1. Withhold approval until the claim is properly supported Correct answer.
  2. Forward the report to the issuer for its consent
  3. Approve the report if the language is softened slightly
  4. Approve the report after removing the analyst's name

Explanation

The approving supervisor must be satisfied that the analysis has a reasonable basis and is not misleading. A consequential forecast resting on a single unnamed source lacks that basis until the analyst documents supporting evidence.

Question 49Preparation and Review of Research Reports

An issuer's CFO tells an analyst, in confidence, about an unannounced earnings collapse. The analyst should:

  1. Use it to close the analyst's existing position quietly
  2. Publish a downgrade without stating the source
  3. Publish the information if two sources confirm it
  4. Share it only with compliance and not trade or publish Correct answer.

Explanation

Selective disclosure of material nonpublic information may not be used for trading or for publishing research. The analyst must escalate the information to compliance and refrain from acting on it.

Question 50Preparation and Review of Research Reports

After distribution, a member discovers that a published report relied on a materially erroneous calculation. What should the member do?

  1. Wait for the next scheduled update to revise the report
  2. Remove the report from the website without further action
  3. Recall the report from clients only if they ask questions
  4. Promptly notify recipients and publish a correction Correct answer.

Explanation

A report that contains a material error is misleading while it circulates. The member must act promptly to correct it and inform those who received it, rather than quietly withdrawing it or waiting for the next update.