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Basic Question 1 of 3
Janzen tells a prospective client, "I may not have a long-term track record yet, but I'm sure that you'll be very pleased with my recommendations and service. In the three years that I've been in business, my equity-oriented clients have averaged a total return of more than 26 percent per year." The statement is true, but Janzen only has a few clients, and one of his clients took a large position in a penny stock (against Janzen's advice) and realized a huge gain. This large gain caused the average of all of Janzen's clients to exceed 26 percent a year. Without this one investment, the average gain would have been 8% a year. Has Janzen violated the Standards?
B. Yes, because the statement about return ignores the risk preferences of his clients.
C. No, because the statement is a true and accurate description of Janzen's track record, and Janzen is not promising that he can earn a 26% return in the future.
A. Yes, because the statement misrepresents Janzen's track record.
B. Yes, because the statement about return ignores the risk preferences of his clients.
C. No, because the statement is a true and accurate description of Janzen's track record, and Janzen is not promising that he can earn a 26% return in the future.
User Contributed Comments 5
| User | Comment |
|---|---|
| rhardin | I agree with the answer, but is it a violation of this lesson's standard, or Misrepresentation? |
| dblueroom | good call rhardin. This is more under this standard, because this is direct communication with client. Though they both share traits of misrepresenting credentials. |
| raffrobb | This is a situation of misrepresenting performance, which is a more specific standard that applies. |
| eddington | 1C "Members and candidates must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions, or other professional activities." Janzen did not misrepresent his performance. The statements are true. He just reported his performance presentation was not complete which violates 3D |
| birdperson | nice call eddington. |
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Martin Rockenfeldt
Learning Outcome Statements
demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity
recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct
identify conduct that conforms to the Code and Standards and conduct that violates the Code and Standards
CFA® 2025 Level I Curriculum, Volume 6, Module 3.