Is the following a violation?

Suppose a CFA writes: “His original portfolios led to superior outperformance with minimal risk” A very noted and respected person in the industry uses this (along with some facts), and hence my question. Isn’t this a clear violation of Standards?

I am not sure if this constitutes a violation. It doesn’t say that his CFA qualification results in this unless what you have copied above is a part of a whole. Atleast that statement doesn’t have any #s. It says minimal risk, but minimal could mean different levels of risk for different segments. If the facts support the statement, it might not be a violation. He is just trying to prove his track record. Again I could be wrong completely. This ethics thing is always a tricky one for me. It would be interesting to see what others think

yeah, i dont think this is violation if he is not a candidate or member of CFA.

Yes, it clearly is. You must instead write: 'Suppose a CFA charterholder writes: “His original portfolios led to superior outperformance with minimal risk” ’

Great… correction here. So suppose that a CFA charterholder’s company publishes: “His original portfolios led to superior outperformance with minimal risk” Isn’t this a clear violation of Standards?

I don’t think it’s a violation. Here’s some relevant excerpts from the handbook regarding Standard VII B: Reference to CFA Institute, the CFA Designation, and the CFA Program. This standard is intended to prevent promotional efforts that make promises or guarantees that are tied to the designation. Statements referencing CFA Institute, the CFA designation, or the CFA Program must not - over-promise the competency of an individual or - over-promise future investment results (e.g., higher performance, lower risk). In my opinion, the quote you’ve posted doesn’t make any claims, implicitly or explicitly, regarding the incumbent’s competency or promises of future performance due to participation in the CFA Program.

Thanks a lot Hiredguns1.

Also, he is using the past tence, >> led If the original portfolio’s did lead to higher performance with lower risk, then it is a fact and cannot be a breach regardless of whether he is a cfa or not.

This is pertaining to the point dash22 made above: Do you mean that as a CFA charter holder, if someone uses past tense and implies that his superior past performance was because of pursuing the program, that will be okay?

“superior outperformance” As opposed to inferior outperformance…?

Shouldn’t there be some objective scale in terms of what qualifies as superior outperformance with minimal risk? I dont know if the person advertising their performance should be the judge of what constitutes minimal risk and great returns.

i.e. actually disclosing the performance and risk #'s

I think this is definitely a violation. 1. The statement implies that past performance should produce similar results in the future. 2. “Superior outperformance” is definitely a violation. The charterholder is not saying that the designation itself causes great performance, but he/she is probably misrepresenting. He/she could instead say something like “outperformed the S&P 500 benchmark” or something along those lines.

Although I think using “superior outperformance” is butchering the English language, I don’t think this is a violation, as long as all of the statements within the sentence are a fact. If in fact this individual assembled a portfolio that resulted in outperformance relative to a pre-determined benchmark, using lower pre-determined risk criteria, then this statement is not a violation. If any of the above is false, then this is a violation of since it would be a misrepresentation. Also, there is no indication in this sentence that implies that the reason for this outperformance with minimal risk is due to his CFA credentials. If the intent was to imply that because of his CFA credentials, his portfolios resulted in outperformance and lower risk, then it would be a violation, since one cannot imply superior capabilities due to being a CFAI member.

I don’t think its a violation for several reasons: 1) He doesn’t cite explicit numbers…instead, he uses generalizations like “superior” and “minimal”…however, what he is benchmarking against? 2) He LED, i.e. in the past. If he actually did achieve high returns against minimal risk (again, taking into consideration that benchmarks are provided to define what that means) and he can show those figures to clients who request that info, then its fine. Another point is that he is not explicitly saying that he is able to repeat his past performance. He is just stating something that happened in the past. There would only be a violation if he was reporting lies about his portfolios’ past performances. Again, assuming that we can verify past porfolios. I don’t think implying breaches any of the standards or code of ethics. I think this statement needs to simply be taken at face value.