Standard I (C) Professionalism - Misrepresentation

Members and Candidates must not knowingly misrepresent any information relating to investment analysis, recommendations, actions, or other professional activities.

Guidance

  • Within the investment industry, there is a tendency to over promise, and provide false guarantees about how an investment product will perform. This standard is aimed at toning down and avoiding any misleading information about an investment product or a company.  The standard covers written material, advertisements, as well as electronic communication, such as email.
  • The standard also covers the issue of plagiarism. It states that a CFA member/candidate should not copy the works of others and presents it as their own. For example, taking some other analyst’s report and presenting it as his own, or even taking a part of someone else’s report and including it in their report. To avoid plagiarism, the members should maintain records of material used to prepare research reports and quote sources except for well recognized sources such as Bloomberg, Standard and Poor’s, etc.
  • The members should also not guarantee a certain return.

Examples

  • Arthur runs a small investment management firm. He subscribes to research services of an independent research firm. He repackages these research reports and presents them to his clients as his own. This is a violation of standard I (C). Arthur can rely on the third-part research as long as he has a reasonable basis to do so. However, he cannot present it as his own. He is misrepresenting the extent of his work in creating the report and misleading his clients.
  • In his promotional material, the partner at an investment boutique cites quotes attributable to "investment experts" without specific references. This is a violation of the standard.
  • In his research report an analyst presents factual information published by recognized statistical reporting services without acknowledgment. This is not a violation of the Code and Standards because the source of factual information is a recognized reporting service. However, if he had used the excerpts from the reports of another investment bank without acknowledgement, it would be a violation of the Standards.

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