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Answer: Not permissible since Bixby is misrepresenting the investment performance she and/or her firm is capable of delivering.
## Explanation Beth Bixby's statement is not permissible because: 1. **Misrepresentation of performance**: She is making specific performance claims (2-4% return premium) that could be interpreted as guarantees or promises of specific investment results, which violates professional standards. 2. **Lack of appropriate disclosure**: The statement doesn't include necessary disclosures about the risks, limitations of the model, or the fact that past performance doesn't guarantee future results. 3. **Potential for misleading investors**: By stating the fund is "designed to track" the S&P 500 with a specific premium range, she may be creating unrealistic expectations among investors. 4. **Professional standards violation**: Financial professionals must avoid making statements that could mislead clients about the certainty of investment outcomes or the capabilities of their services. **Correct Answer: C** - Not permissible since Bixby is misrepresenting the investment performance she and/or her firm is capable of delivering.
Author: LeetQuiz Editorial Team
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Beth Bixby, FRM, oversees a mid-cap fund that is required to invest in a minimum of 40 and a maximum of 60 different issues. Bixby uses a quantitative approach to actively manage the assets. In promotional materials, she states that "through our complex quantitative approach, securities are selected that have similar exposures to a number of risk factors that are found in the S&P 500 Index. Thus the fund is designed to track the performance of the S&P 500 Index but will receive a return premium of between 2% and 4% according to our model's risk-return measures." This statement is:
A
Permissible since the assertion is supported by modern portfolio theory and estimates from the firms' model.
B
Not permissible since Bixby is misrepresenting the services that she and/or her firm are capable of performing.
C
Not permissible since Bixby is misrepresenting the investment performance she and/or her firm is capable of delivering.
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