Answer-first summary for fast verification
Answer: misrepresentation of achievable returns.
**Explanation:** Zapata violated **Standard I(C): Misrepresentation**, which prohibits CFA members and candidates from guaranteeing clients any specific return on volatile investments. While returning the original capital to investors is not a violation, promising unrealistic returns (12% per year) and failing to achieve them constitutes a misrepresentation. The investment mandate, while broadly defined, is not the primary issue here. The violation lies in the unrealistic promise of returns, which misled clients.
Author: LeetQuiz Editorial Team
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Belen Zapata, CFA, is the owner of Kawah Investments. Kawah promises investors returns of up to 12% per year by investing in non-investment-grade bonds and other fixed-income instruments. Due to unprecedented low bond market yields, Zapata fails to achieve the expected returns. No investments are made, and clients receive their original investment back. Under the CFA Institute Standards of Professional Conduct, Zapata most likely violated the standards because of the:
A
return of capital.
B
misrepresentation of achievable returns.
C
investment mandate.
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