CFA Practice Question

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CFA Practice Question

Kent Hold is tendering for a future client. He informs the client that he is an expert portfolio manager and has averaged a 30% annual return for his clients over the past two years. However, Kent does not inform his client that in this time period he only managed two accounts. In addition, a large part of the return that he achieved was as a result of a large delisting. Without this delisting, the return would have only been 12% average per annum.

Has Kent violated the Standards of Professional Conduct?
A. Yes, because he did not consider the client's investment preferences when stating his performance.
B. Yes, because his statements do not fairly and accurately reflect his track record.
C. No, because the 30% return is in fact a true record of Kent's performance.
Explanation: A misrepresentation is any untrue statement of a fact or any statement that is otherwise false or misleading. Although Kent's statement is factually correct, it is misleading since his statement does not fairly and accurately reflect his track record.

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