Explanation:
This question relates to ethical standards in financial risk management, specifically regarding performance claims in promotional materials.
Key Analysis:
Why Option C is Correct:
Why Other Options Are Incorrect:
Professional Standards Violation: This violates the principle of fair representation and avoiding misleading statements about investment performance, which are core ethical requirements in financial risk management.
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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.