NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Ethical Issues
Which behaviour by an investment adviser best reflects the ethical duty of fair and honest communication regarding past performance?
The adviser should present returns over comparable periods and clearly state that past performance may not be sustained. This keeps communication fair, balanced and not misleading, whereas cherry-picking the best year, guaranteeing repetition or dropping the benchmark distorts the client's understanding.
- AShowing only the best-performing year of a scheme
- BGuaranteeing that past returns will repeat
- CPresenting returns over comparable periods with a clear statement that past performance may not be sustainedCorrect
- DOmitting the benchmark so the comparison looks simpler
Explanation
Communication must be fair, balanced and not misleading. Showing only the best period, promising repetition or leaving out the benchmark all distort the picture. Comparable periods with a caution are the honest approach.
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