What is the difference between Misrepresentation, Performance Presentation and Communication with Clients and Prospective Client
What is the difference between Misrepresentation, Performance Presentation and Communication with Clients and Prospective Client?
Michelieu tells a prospective client, “I may not have a long-term track record yet, but I’m sure that you’ll be very pleased with my recommendations and service. In the three years that I’ve been in the business, my equity-oriented clients have averaged a total return of more than 26% a year.” The statement is true, but Michelieu only has a few clients, and one of his clients took a large position in a penny stock (against Michelieu’s advice) and realized a huge gain. This large return caused the average of all of Michelieu’s clients to exceed 26% a year. Without this one investment, the average gain would have been 8% a year.
What is the violation here? I think it may be performance presentation because it tells about his past performance. I also think it may be communication with clients and prospective client because it is a conversation between him and his prospective client. But the answer is misrepresentation.
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