Which CFA Institute standard is implicated when risk disclosures misstate the potential losses or omit material risks?

• A. Standard IV.D Performance Presentation.
• B. Standard VI.A Disclosure of Conflicts.
• C. Standard IV.B Fair Dealing.
• D. Standard IV.B Fair Dealing.

Answer: (C)

Risk disclosures must be complete and truthful so clients can make informed decisions. When a disclosure misstates potential losses or omits material risks, the information presented to the client is misleading. This directly violates Fair Dealing, which requires communications with clients to be fair and not omit or misrepresent material facts. In CFA standards, misrepresentation or withholding material risk information in disclosures undermines the client's ability to assess risk and makes the advisor’s conduct unfair. Therefore, the standard that applies is the one governing fair dealing in client communications. The other options address performance presentation or conflicts of interest, which do not directly cover the fairness of risk disclosures.