Explanation:
Statement 1 violates the Standards because it makes an unconditional guarantee about future performance ("will outperform") over a specific 10-year period. This is a misrepresentation of investment performance and violates Standard I(C) - Misrepresentation.
Statement 2 is acceptable because it uses qualified language ("likely to outperform") and does not make an unconditional guarantee. This type of forward-looking statement with appropriate qualifications is generally permissible.
Statement 3 violates the Standards because it makes an unconditional guarantee ("guarantees you will not lose money") about principal protection. This is a misrepresentation and violates Standard I(C) - Misrepresentation, as no equity investment can guarantee 100% principal protection.
Therefore, the member has violated the Standards with Statement 1 and Statement 3 only, making option B the correct answer.
Key Standards Violations:
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In a client presentation regarding a potential equity investment, a member makes the following statements: Statement 1: "This investment will outperform the S&P 500 over a ten-year period." Statement 2: "This investment is likely to outperform the market over a one-year period." Statement 3: "With this product's 100% principal protection, our firm guarantees you will not lose money." The member has most likely violated the Standards by making:
A
Statement 1 only
B
Statement 1 and Statement 3 only
C
Statement 1, Statement 2, and Statement 3