A firm suggests a risk-free investment to clients when such a product does not exist. Violation?

• A. Standard I.D Misconduct
• B. Standard IV.B Fair Dealing
• C. Standard III.B Additional Compensation Arrangements
• D. Standard VII.B Reference to CFA Institute

Answer: (B)

The key idea is fairness in presenting investment options and not misrepresenting what exists. Claiming to offer a risk-free investment when no such product exists is misleading and cheats clients of an accurate view of risk and availability. In CFA ethics terms, that falls under fair dealing: you must present only available, suitable options and Describe them accurately, without promising something that doesn’t exist.

This isn’t primarily about misconduct in general, compensation arrangements, or referencing the CFA Institute. Those areas cover different issues, but they don’t specifically address the obligation to be honest about what products actually exist and to avoid portraying them as risk-free.