Scenario: A firm prints performance numbers with a disclosure that “past performance is not indicative of future results” but hides that the numbers are back-tested. Which CFA Institute Standard is violated?

• A. Standard IV.E Preservation of Confidentiality
• B. Standard IV.B Fair Dealing
• C. Standard V.A Diligence and Reasonable Basis
• D. Standard IV.D Performance Presentation

Answer: (D)

The key idea is that performance data shown to clients must be presented fairly and not misleading. When a firm uses back-tested or hypothetical results, those must be clearly labeled as such and described so they cannot be mistaken for actual, live performance. In this scenario, the firm includes the standard warning that past performance isn’t indicative of future results, but it hides that the numbers are back-tested. That concealment makes the presentation misleading: readers are likely to treat the numbers as real, historical performance rather than as hypothetical results derived from a back-tested methodology. The disclaimer cannot fix the misrepresentation by itself because the core issue is how the data are portrayed, not just what is stated about future results. This is precisely what the CFA Institute Standard on Performance Presentation governs: ensuring that performance data are reported honestly, with any back-tested or hypothetical data clearly identified and not presented as actual performance.