Ethics question from CFAI mock afternoon #8

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Answer = B

The RFP was done on the basis of the old organizational structure, which would have included the retired finance director. Standard I © requires members not to misrepresent the qualifications of a firm. With a senior professional leaving the firm, the organizational structure should be updated prior to submitting a RFP for a potential client’s consideration.

Why is it not C? I thought you can’t guarantee investment returns? Or maybe that doesn’t relate to misrepresentation but to Standard IV performance presentation?

CFAI Reading 2, Standard I©, page 43, “Standard I© does not prohibit members and candidates from providing information on investment products that have guarantees built into the structure of the products themselves or for which an institution has agreed to cover any losses.” In this case, the question explicitly states that it is “a guaranteed strucutred savings product.” So the 5% is built into the product no matter what. Also, if you look at example 6 in Standard I©, an adviser explains that the principal of an investment that is moved to “bank-sponsored CDs and money market accounts [in the U.S.] will be guaranteed up to a certain amount.” The explanation says that this description is “not inappropriate” (because these accounts are FDIC insured by the U.S. government), but only if the amount moved falls within the government-insured limit.