Explanation:
The investment advisor violated the Professional Integrity and Ethical Conduct section of the Code of Conduct by misrepresenting the bonds as being safe and secure when in fact they were investing in risky projects and backed only by the revenue generated from those projects. According to the Code, GARP Members shall not knowingly misrepresent details relating to analysis, recommendations, actions, or other professional activities.
(Book 1, Module 11.1, LO 11.a)
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Question 17
An investment advisor specializes in selling municipal bonds and advertises on television explaining their safety and security. The bonds she is currently selling are limited obligation bonds backed only by the revenue generated from the projects they fund, which include a housing project and a golf course. The advisor tells her prospective clients that the bonds are safe, secure, and offer generous interest payments. Which of the following statements is most correct regarding the investment advisor's actions? The advisor:
A
did not violate the GARP Code of Conduct because municipal bonds are generally regarded as being safe investments.
B
violated the part of the GARP Code of Conduct dealing with confidentiality.
C
violated the GARP Code of Conduct when she misrepresented the bonds by not explaining their inherent risks.
D
has not violated any of the ethical responsibilities related to the GARP Code of Conduct.
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