{"id":862,"date":"2019-07-12T17:36:00","date_gmt":"2019-07-12T17:36:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=862"},"modified":"2025-04-18T19:50:12","modified_gmt":"2025-04-18T19:50:12","slug":"standard-3d-performance-presentation","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/ethical-and-professional-standards\/standard-3d-performance-presentation\/","title":{"rendered":"Standard III(D) \u2013 Performance Presentation"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Standard III \u2013 Duties to Clients and Prospective Clients (2025 LI CFA\u00ae Exam \u2013 Ethics\u2013Module 3)\",\n  \"description\": \"This video lesson covers CFA Institute\u2019s Standard III \u2013 Duties to Clients and Prospective Clients. It explains loyalty, prudence, and care; fair dealing; suitability; performance presentation; and preservation of confidentiality. The lesson includes examples and best practices for acting in the best interest of clients and maintaining ethical integrity in professional conduct.\",\n  \"uploadDate\": \"2022-08-24T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/i.ytimg.com\/vi\/coTBbAxXxTA\/hqdefault.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=coTBbAxXxTA\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/coTBbAxXxTA\",\n  \"duration\": \"PT29M09S\"\n}\n<\/script>\n\n\n\n<p>[vsw id=&#8221;coTBbAxXxTA&#8221; source=&#8221;youtube&#8221; width=&#8221;611&#8243; height=&#8221;344&#8243; autoplay=&#8221;no&#8221;]<\/p>\n<p>Standard III(D) \u2013 Performance Presentation obliges CFA members to make sure communication about investment performance is fair, accurate, and complete.<\/p>\n<h2>Compliance<\/h2>\n<p>Similar to Standard I(C) \u2013 Misrepresentation, Standard III(D) \u2013 Performance Presentation insists that information provided by investment professionals be representative of factual information and as complete as possible.\u00a0 Standard III(D) \u2013 Performance Presentation, of course, is concerned primarily with duties to clients.<\/p>\n<p>This standard prohibits inflation of yields for past investment, as well as projections for current recommendations.\u00a0 The illusions of inflated performance by limiting discussion of risks are also barred.<\/p>\n<p>To comply with Standard III(D) \u2013 Performance Presentation, a firm should consider the level of financial sophistication of its clients, making sure to include as much explanation as needed. It is also beneficial to include the performance of a composite of similar portfolios rather than a single account.\u00a0 Finally, all disclosures related to tax, fees, and prior performance should be included in the presentation of recommendations.<\/p>\n<h2>Violation<\/h2>\n<p>It may be tempting for a fund manager to publicize exceptional earnings for a previous year.\u00a0 However, to infer that similar performances can be expected, particularly when a fund\u2019s performance is lower when averaged over a multi-year timeframe, would violate Standard III(D) \u2013 Performance Presentation. Should the fund manager guarantee a specific result, then Standard I(C) \u2013 Misrepresentation would also be in violation.<\/p>\n<blockquote>\n<h2>Question<\/h2>\n<p>Haruka Lin manages a fund for which 65% of the financial assets are held in 10 of the 120 stocks. The performance of that 65% of the fund outperformed the average index of similar indexes. Lin analyzes the year-over-year performance for those 10 major stocks and issues an email statement to current and prospective clients publicizing performance with an announcement that \u201ccurrent year results are likely to outperform popular index results.\u201d\u00a0 In how many ways has Lin violated Standard III(D) \u2013 Performance Presentation?<\/p>\n<ol style=\"list-style-type: upper-roman;\">\n<li data-tadv-p=\"keep\">Lin did not perform a complete analysis of her fund.<\/li>\n<li data-tadv-p=\"keep\">The analysis of a single-year performance is limited.<\/li>\n<li data-tadv-p=\"keep\">Fund managers must not guarantee specific results based on past performance.<\/li>\n<\/ol>\n<ol style=\"list-style-type: upper-alpha;\">\n<li data-tadv-p=\"keep\">I &amp; II, only<\/li>\n<li data-tadv-p=\"keep\">II &amp; III, only<\/li>\n<li data-tadv-p=\"keep\">All of the above<\/li>\n<\/ol>\n<h4 data-tadv-p=\"keep\">Solution<\/h4>\n<p>The correct answer is C.<\/p>\n<p>Haruka Lin has violated Standard III(D) \u2013 Performance Presentation in many ways.\u00a0 First, Lin did not perform a complete analysis of her fund because although 65% of a fund composes a majority of holdings, 10 of 120 stocks result in incomplete information. Furthermore, an analysis of a single-year performance is limited in nature and therefore contributes to an incomplete analysis. Additionally, fund managers must not guarantee specific results based on past performance.<\/p><\/blockquote>","protected":false},"excerpt":{"rendered":"<p>[vsw id=&#8221;coTBbAxXxTA&#8221; source=&#8221;youtube&#8221; width=&#8221;611&#8243; height=&#8221;344&#8243; autoplay=&#8221;no&#8221;] Standard III(D) \u2013 Performance Presentation obliges CFA members to make sure communication about investment performance is fair, accurate, and complete. Compliance Similar to Standard I(C) \u2013 Misrepresentation, Standard III(D) \u2013 Performance Presentation insists that&#8230;<\/p>\n","protected":false},"author":18,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[],"class_list":["post-862","post","type-post","status-publish","format-standard","hentry","category-ethical-and-professional-standards","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Performance Presentation Standard III(D) | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Learn the CFA Standard III(D) guidelines on fair, accurate, and complete investment performance presentation for ethical compliance.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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