Put the Performance Presentation standard, III(D), into practice
The idea
Members must make reasonable efforts to ensure performance information is fair, accurate and complete. That prohibits presenting a composite as though it were a single account, omitting terminated accounts, showing a simulated or back-tested record without labelling it as such, or presenting gross-of-fee figures without saying so. Presenting a selected best-performing account as representative of the firm's results also breaches it. Compliance with the global investment performance standards satisfies the Standard but is not required by it — the Standard's own requirement is simply that the presentation not mislead.
A practice question
Which practice violates Standard III(D)?
- Disclosing that returns are shown gross of feesWhy not: Gross returns are permitted as long as the presentation says so, which this does.
- Showing the best account as representative — correct
- Including terminated accounts in a compositeWhy not: Including them is what makes a composite honest, since accounts often terminate after poor results.
Standard III(D) Performance Presentation requires a fair, accurate and complete picture. Showing the best account as representative misleads even though every figure in it is true.
A harder one
A firm shows returns its strategy would have produced had it existed five years ago. What must accompany them?
- An audit opinionWhy not: An audit could confirm the calculation and would not tell the reader the results were never achieved.
- A clear label that the record is simulated — correct
- Nothing, provided the method is disclosed in an appendixWhy not: A method buried in an appendix does not correct the impression the headline figures create.
Standard III(D) requires a clear label that the record is simulated rather than actual, since a reader cannot otherwise tell the difference.
The hardest tier
A firm shows its best-performing account as representative of its approach. Is that permitted?
- Yes, provided the account is real and the figures are accurateWhy not: Accuracy of each number is not the test. The Standard asks whether the presentation as a whole misleads.
- Yes, if the account is the oldestWhy not: Age is not representativeness, and choosing on any single criterion still selects one account out of many.
- No, the picture is unrepresentative — correct
Standard III(D) is about the impression created. Selecting the best account gives an unrepresentative picture even though every figure in it is accurate.
In the app: 9 practice questions on this outcome, a narrated walkthrough with diagrams, spaced review that brings it back before you forget it.
Take the free diagnostic →