Ethical Performance Reporting Under the Asset Manager Code

As an investment manager, your firm adheres to the CFA Institute's Asset Manager Code of Professional Conduct. Recently, there has been a push towards enhancing transparency and clarity in performance reporting to clients and stakeholders.

In this context, consider the following scenario: Your firm has experienced an unusual period of high returns due to a temporary surge in market conditions. You are preparing a performance report that will be distributed to clients, and you face ethical dilemmas regarding the representation of these results.

1. Discuss the ethical considerations associated with performance reporting in this scenario.

2. How should your firm approach performance reporting to align with the principles outlined in the Asset Manager Code, particularly concerning fair representation, disclosure, and communication with clients?

3. Elaborate on the potential consequences of failing to adhere to these ethical standards in performance reporting.