Series 7 practice questionmediumCommunications with the Public (Retail and Institutional) — Misleading Statements
A broker-dealer creates a brochure that claims their mutual fund "guarantees above-market returns." Why is this statement problematic?
- AIt is a prohibited performance guarantee✓ Correct answer
- BIt is allowed if past performance supports the claim
- CIt is an opinion, not a fact
- DIt is a forward-looking statement
Explanation
Why A — It is a prohibited performance guarantee
FINRA prohibits broker-dealers from making guarantees of specific returns or outcomes, as this is misleading regardless of past performance.
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