Skip to content

CFA Level II Exam · Guidance for Standard III: Duties to Clients

Standard III(D) Performance Presentation for CFA Level II

Updated 7 October 2026 · Fact-checked

Standard III(D) requires you to make reasonable efforts to ensure that performance information you present is fair, accurate and complete. You must not misstate performance or mislead clients. To solve a question, check what was included or left out, how it was labelled, and whether any GIPS claim is truthful.

Understand Performance Presentation (Standard III(D))

Standard III(D) sits in the duties to clients. Clients and prospects use past performance to pick and keep managers. If the numbers are tilted, they decide on false information. The Standard protects that decision.

The wording is a duty of reasonable efforts. You must try to ensure that performance information is fair, accurate and complete. It does not promise perfection. A good-faith error that you then correct is different from a figure you knew was selective.

Think of three tests. Fair means no spin or cherry picking, such as showing only the best periods or best accounts. Accurate means the numbers are calculated correctly and are not exaggerated. Complete means nothing material is left out, for example fees, the time period, or the benchmark used.

The Standard covers your own firm's track record and also what you say about others. You must not claim a past result as your own if you were not responsible for it, and you must make clear whether returns are gross or net of fees. Presenting a composite that includes only successful accounts is a classic breach.

GIPS (Global Investment Performance Standards) are voluntary, ethics-based standards for performance reporting. Complying with GIPS is not required by Standard III(D), but it is encouraged. If you claim compliance, the claim must be true. You may not say you are "partially compliant" or "compliant except for...". A firm either meets all requirements and claims compliance, or it does not claim it. Claiming compliance when it is not true is also a misrepresentation issue under Standard I(C).

On the exam, the vignette usually describes a brochure, pitch book or email with performance figures. Your job is to spot what makes it unfair, inaccurate or incomplete, and to name the correct action.

Key formulas to remember

Core duty of Standard III(D)
Reasonable efforts to ensure performance information is fair, accurate and complete
The test is reasonable efforts, not a guarantee. Use all three words when you reason about a case.
Fair, accurate, complete test
Fair = no cherry picking or spin; Accurate = correct calculation; Complete = no material omission
Match each fact in the vignette to one of the three words.
No misleading claims
Do not state or imply that past performance is certain to continue
Past results are not a promise. Guarantees about future returns also breach Standard I(C).
GIPS compliance claim
Claim only if the firm meets all applicable GIPS requirements
Partial compliance claims are not allowed. Compliance is voluntary but the claim must be true.
Recommended practices
Consider GIPS, use consistent calculation methods, include all relevant accounts in a composite, and keep supporting records
Records link to Standard V(C). Show gross or net of fees clearly.

How to solve Performance Presentation (Standard III(D)) questions

Use this method for any item-set question on performance presentation. Read the vignette for facts first, then apply the three tests.

  1. 1Identify what performance information is being shown, and to whom (prospect, client, regulator, public).
  2. 2List what is included: time periods, accounts, benchmark, gross or net of fees, composite membership.
  3. 3List what is left out or changed: dropped accounts, poor periods, fees, a different benchmark, or a changed start date.
  4. 4Test each point as fair, accurate or complete. Name the one that fails.
  5. 5If GIPS is mentioned, check whether the firm claims compliance and whether it truly meets all requirements. Partial claims are a violation.
  6. 6Check whether the firm made reasonable efforts, for example a review of the data or a correction once an error was found.
  7. 7Pick the answer that names the Standard, states violation or no violation, and gives the corrective action: correct, disclose, or stop using the material.

Quickest way: Fair, accurate, complete scan

When to use it: Use when you have little time and the answer options differ mainly on violation versus no violation.

  1. Scan the vignette for words like best, selected, only, excluding, gross, compliant, guaranteed.
  2. Ask: is anything cherry picked, wrongly calculated or missing?
  3. If GIPS is claimed with any qualification, it is a violation.
  4. If the firm disclosed clearly and used all accounts, it is usually no violation.
  5. Choose the option that corrects the material or adds the missing disclosure.

Common mistakes in Performance Presentation (Standard III(D))

  • Thinking GIPS compliance is required by Standard III(D)

    The Standard and GIPS both deal with performance reporting, so they get merged.

    Fix: Remember that GIPS is voluntary. The Standard requires fair, accurate, complete information. If a GIPS claim is made, it must be true.

  • Accepting a statement like "compliant with GIPS except for..."

    It sounds honest and detailed.

    Fix: Partial compliance claims are not allowed. A firm is either compliant or does not claim compliance.

  • Treating a representative account as acceptable without checking

    One account looks like a fair summary.

    Fix: Showing only the best account or a selected set is cherry picking. A composite should include all relevant accounts for the strategy.

  • Ignoring omitted fees or mixing gross and net returns

    Candidates focus on the headline return.

    Fix: Check whether returns are gross or net and whether this is stated. Omitting this can make the presentation incomplete or misleading.

  • Assuming any error is a violation

    The Standard feels strict.

    Fix: The duty is reasonable efforts. An honest error that is found and corrected promptly is different from a knowingly misleading figure.

  • Saying a firm may claim a manager's past record as its own

    Candidates think the track record belongs to the new employer.

    Fix: A firm may not present results it did not produce as its own. Make clear who produced the results and which team or manager was responsible.

Worked examples

Example 1

Vignette: Kestrel Asset Management runs a global equity strategy with 10 client accounts. In its pitch book it presents a composite of the 6 accounts that outperformed the benchmark over five years. The 4 lagging accounts are left out. The pitch book says Kestrel is "in compliance with GIPS." Question 1: Does the composite meet Standard III(D)? Question 2: What should Kestrel do?

Show the solution
  1. Identify the information: a composite of 6 of 10 accounts in the same strategy.
  2. The 4 excluded accounts underperformed, so the choice looks selective. That is cherry picking.
  3. Apply the tests: it is not fair and not complete, because relevant accounts were omitted and performance is likely overstated.
  4. The GIPS claim also cannot be true, because GIPS requires all actual fee-paying discretionary portfolios of the strategy to be in a composite.
  5. Corrective action: rebuild the composite with all 10 accounts, recalculate returns, and withdraw the GIPS claim unless the firm truly meets all requirements.

Answer: Q1: No. It violates Standard III(D) because it is not fair or complete. Q2: Include all 10 accounts in the composite, restate the performance, and remove the GIPS compliance statement unless full compliance is actually met.

Example 2

Vignette: Analyst Priya joins Dunmore Capital from another firm. In Dunmore's marketing brochure she writes that she "generated an annualized 14% over six years." That record belongs to a team at her previous firm, where she was one of four members and the team lead made the allocation decisions. The brochure does not say the record is from the earlier firm or that it is team-based. Question 1: Has Priya violated Standard III(D)? Question 2: What would be acceptable?

Show the solution
  1. Identify the claim: a personal track record of 14% a year.
  2. Check the facts: the record was a team record from a previous firm, and Priya was not the decision maker.
  3. Apply the tests: the brochure is not accurate, because it implies personal responsibility, and not complete, because it omits the source and context.
  4. This is a misleading claim, so Standard III(D) is breached.
  5. Acceptable approach: state clearly that the results were achieved at the prior firm by a team, describe her role, and present only what can be supported by records.

Answer: Q1: Yes. The brochure is inaccurate and incomplete and so breaches Standard III(D). Q2: Present the record as a prior-firm team result, describe her actual role, and keep supporting records.

Exam tips

  • Read the vignette for the word that signals the problem: selected, best, excluded, only, gross, compliant. Each points to a test.
  • If an answer says a firm may claim partial GIPS compliance, reject it.
  • Look for the corrective action in the answer: include all accounts, restate, add disclosure or remove the claim.
  • Do not mark a case as a violation when the firm disclosed fully and used all relevant accounts. Questions often include a compliant version.
  • Link the case to related Standards when asked: false claims also touch Standard I(C) Misrepresentation, and supporting records touch Standard V(C).

Performance Presentation (Standard III(D)) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Performance Presentation (Standard III(D)): frequently asked questions

What does Standard III(D) require?

It requires members and candidates to make reasonable efforts to ensure that investment performance information they present is fair, accurate and complete. It also bars misleading claims about past results. The duty applies to presentations for current and prospective clients.

Is GIPS compliance required under Standard III(D)?

No. GIPS is voluntary and the Code and Standards encourage it. But if a firm claims compliance, the claim must be true. Claims of partial compliance are not permitted.

What is cherry picking in performance presentation?

It means showing only the best accounts, periods or results and leaving out weaker ones. This makes performance look better than it was. It fails the fair and complete tests.

How do I answer performance presentation ethics questions quickly?

Find what was shown and what was left out. Test it against fair, accurate and complete, and check any GIPS claim. Then choose the option that names the violation and the fix.