Which CFA Institute standard is violated when back-tested performance is presented as actual historical performance without proper disclosures?

• A. Standard IV.D Performance Presentation.
• B. Standard IV.B Fair Dealing.
• C. Standard VI.C Referral Fees.
• D. Standard III.A Loyalty, Prudence, and Diligence.

Answer: (A)

The key concept is that performance claims must be fair, accurate, and properly disclosed. Presenting back-tested results as actual historical performance without clear disclosures misleads investors about what was actually achieved, since back-tested results are hypothetical and not subject to real-world trading costs, slippage, or investable constraints. The CFA Institute standard that covers this is the Performance Presentation standard, which requires that any nonactual results be clearly labeled as such and accompanied by the relevant assumptions, methodologies, time frame, and limitations. Without those disclosures, the presentation fails to be fair and complete, making it the violation here. Other standards relate to different duties (fair dealing, avoiding conflicts, etc.) and do not directly govern the disclosure specifics of performance presentations.