Standard III (D) - Performance Presentation

The members must ensure that the investment performance being communicated to the clients is fair, accurate, and complete.

Guidance

• The CFA members should not misstate performance or mislead clients about investment performance
• The CFA members should not misrepresent past performance
• The CFA members should provide complete performance information about any fund or portfolio
• The CFA members should not state or in any way imply the ability to achieve returns similar to returns achieved in the past

Examples of Violation

• Example 1: An investment manager reports to his client that they can expect a 20% growth in the next year. This calculation is based only on the past two years’ performance of the fund. In their disclosure they should have mentioned that this forecast is based on only past two years’ performance.
• Example 2: An investment firm claims compliance with the GIPS standards, but the return calculations are actually not as per the requirements of GIPS standards.
• Example 3: While promoting an investment product, the manager promotes to clients by showing the performance results for a certain period. The performance results are actually simulated, but this information is not disclosed to the clients.