A professional states that an investment will be risk-free in a marketing presentation.

• A. Standard V.B Communication with Clients and Prospective Clients
• B. Standard VI.B Priority of Transactions
• C. Standard I.C Misrepresentation
• D. Code of Ethics and Standards

Answer: (C)

The key idea is that you must not misrepresent an investment's characteristics, including its risk, in any communication. Saying an investment will be risk-free in a marketing presentation asserts a fact about its risk that is almost certainly false, since almost all investments carry some level of risk. Presenting such an absolute claim knowingly or recklessly misleads clients or prospects and undermines their ability to make informed decisions. That violation fits squarely with the rule against misrepresentation, which requires honesty and accuracy in statements about investments.

Marketing communications must be truthful, and while there are also rules about how to present information to clients, the fundamental issue here is that declaring something risk-free is a false or misleading statement about an investment’s risk profile.