Question #4 - Reading 42.1 Standards of Professional Conduct Guidance for Standards I

Reading: Reading 42.1 Standards of Professional Conduct Guidance for Standards I

PDF File: Reading 42.1 Standards of Professional Conduct Guidance for Standards I.pdf

Page: 2

Status: Incorrect

Correct Answer: B

Your Answer: A

Question

While having a conversation with a prospective client, John Henry states that his performance across all of his past clients over the past five years was over 20%, which was 200 basis points higher than his benchmark. He tells the client that while the benchmark may rise or fall over time, his excess performance will remain consistent. Henry violated the Standards of Professional Conduct because:

Answer Choices:

A. he cannot discuss performance without clearly stating that the composite does not conform to GIPS

B. the statement of excess performance is misleading with respect to its certainty

C. he cannot discuss prospective future performance in any manner

Explanation

Guaranteeing performance on investments that are inherently volatile is misleading to clients.

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