What exactly counts as misrepresentation under the CFA Institute Standards of Professional Conduct?

Misrepresentation under Standard I(C) is broader than most candidates realize. It covers any untrue statement or omission of fact, or any false or misleading impression created by a member or candidate. Here are the key dimensions:

1. Direct Falsehoods

This is the obvious case: fabricating performance data, inflating credentials, or claiming a track record you don't have. For instance, if an analyst at Northcrest Capital claims their equity strategy returned 18% annualized when the actual figure was 12%, that's a clear violation.

2. Plagiarism

Using another analyst's research, models, or conclusions without attribution constitutes misrepresentation. If you download a DCF model built by a colleague at another firm and present the output as your own original analysis, you've violated Standard I(C) even if the numbers themselves are correct.

3. Omission of Material Facts

Deliberately leaving out important caveats or risks is just as problematic as adding false information. If your buy recommendation on Verdant Energy omits the fact that 80% of their revenue comes from a single government contract expiring in 6 months, you've misrepresented the investment thesis.

4. Misleading Presentation

Cherry-picking time periods for performance, using inappropriate benchmarks, or presenting gross-of-fee returns without disclosure are all forms of misrepresentation.

Practical Example:

Sara, a portfolio manager at Ridgeview Partners, creates a marketing deck showing her fund's performance from March 2022 to March 2026. The fund happened to launch in January 2022 but had two terrible months. By starting the chart in March, Sara creates a misleading impression of the fund's full track record. This is misrepresentation through selective presentation.

Key exam tip: The CFA exam loves testing whether candidates can identify misrepresentation in subtle scenarios like partial disclosure or implied claims. Always ask yourself: 'Would a reasonable investor have a different view with the full picture?'

For more Ethics practice, check out our CFA Level I question bank on AcadiFi.