Did Steffanie Graff Violate the CFA Code of Ethics?

Explanation

Standard IV (B.6) - Prohibition against Misrepresentation.

Based on the information provided, Stephanie Graff, an investment advisor with Wimbledon Advisors, Inc., made a statement to her clients regarding her investment advice track record. Let's analyze each answer choice to determine if Stephanie has violated the code of ethics.

A. Yes, because she has misused her CFA charter to imply superior performance. This answer choice suggests that Stephanie has misused her CFA charter designation to imply superior performance. However, the information provided does not indicate that Stephanie explicitly referenced her CFA charter as a basis for her performance claims. Therefore, it is not clear from the given information whether Stephanie has misused her CFA charter.

B. Yes, because the statements misrepresent her track record. This answer choice suggests that Stephanie's statements misrepresent her track record. The information provided states that Stephanie claimed to have a long record of successful investment advice that led to an annual return of 32% over the past three years. However, it is also mentioned that a large part of this return was due to a lucky coincidence involving a penny stock that experienced a 200% increase due to a takeover. This suggests that Stephanie's overall track record would have been lower without this lucky event. Therefore, her statement could be seen as misrepresenting her track record by implying that the high returns were solely a result of her investment advice. Thus, this answer choice is a valid explanation.

C. Yes, since her presentation of her own performance is in violation of the AIMR-PPP. This answer choice suggests that Stephanie's presentation of her own performance is in violation of the AIMR-PPP (Association for Investment Management and Research - Performance Presentation Standards). The AIMR-PPP sets guidelines for the fair representation and disclosure of investment performance. Stephanie's statement implies that her clients' accounts had an annual return of 32% over the past three years. However, if a large part of this return was due to a lucky coincidence rather than her investment advice, her presentation may not be in line with the AIMR-PPP's principles of fair representation. Therefore, this answer choice is a valid explanation.

D. No, because the statements are factual, and she has not promised any future returns. This answer choice suggests that Stephanie has not violated the code of ethics because her statements are factual, and she has not made any promises regarding future returns. However, even though Stephanie's statement may contain some factual information, it also appears to misrepresent her overall track record by implying that the high returns were solely a result of her investment advice. Therefore, this answer choice does not provide a comprehensive explanation of the situation.

Based on the detailed analysis, answer choices B and C are valid explanations for Stephanie's potential violation of the code of ethics.