Financial Risk Manager Part 1
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Theresa Conway, FRM, is a trade manager of an investment fund specializing in currency trading. In a report sent to investors, Conway outlines her trading strategy which is hinged on the appreciation of the United States dollar against other world currencies. She quantifies expected returns if the dollar appreciates by less than 5%, 5% - 10%, and by more than 10%. She also outlines possible scenarios if the dollar depreciates by similar margins. Also explicitly stated therein is that these projections are her professional opinion. Has Conway violated the GARP Code of Conduct with respect to communication?
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TTanishq
A
Yes.
B
No, because she disclosed the basic details of her investment strategy.
C
No, because she explicitly distinguishes fact from opinion, while still giving a range of scenarios if the dollar appreciates or depreciates – therefore capturing most (or all) possible scenarios.
D
No, because it's her legal duty to communicate the details of her strategy to investors.
Explanation:
Conway did not violate the GARP Code of Conduct with respect to communication. The GARP Code of Conduct requires members to disclose factual data that is devoid of falsehoods. In addition, personal judgment or opinion must be clearly distinguished from facts. Conway adhered to these requirements in her communication with her investors. She provided factual data about her trading strategy and the potential scenarios based on the appreciation or depreciation of the United States dollar. She also clearly distinguished her professional opinion from the facts by stating that the projections are her professional opinion. Therefore, she did not violate the GARP Code of Conduct with respect to communication.
Choice A is incorrect. Theresa Conway did not violate any rules of the GARP Code of Conduct regarding communication. She provided a clear explanation of her investment strategy and distinguished fact from opinion, which is in line with the code's requirements.
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