Performance Presentation Ethics in Investment Advisory

Hard Cfa Institute Code And Standards Duties - Performance Presentation

As an investment advisor firm, XYZ Investments has historically used performance data from a proprietary model that includes a mix of simulated returns and actual returns for its managed accounts. During an upcoming presentation to prospective clients, the firm plans to showcase these performance statistics, using both the simulated data and actual data together without clearly segregating them.

According to the CFA Institute Code of Ethics and Standards of Professional Conduct, particularly concerning performance presentation, what should XYZ Investments consider when preparing this presentation to ensure adherence to ethical standards?

XYZ Investments can present the performance data as long as they disclose their methodology used to generate returns.

XYZ Investments must separate actual performance from simulated performance to avoid misleading potential investors.

XYZ Investments can use simulated returns as long as they have a track record of high actual returns.

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