The description provided by Gonzales is an accurate depiction of the process by which the model selects stocks to recommend for either a purchase or sell. Gonzales does not provide every detail regarding the individual factors used to screen the stocks or how the algorithm works since these are proprietary details. In describing the historical results of the model, however, Gonzales has violated Standard III(D) Performance Presentation and Standard I(C) Misrepresentation. In his report, Gonzales omitted the fact that the model selected several stocks with zero or negative returns. By not including this result in the report, Gonzales is not portraying a fair, accurate, and complete performance record (a violation of Standard III[D]) and thus intentionally misleads his clients with the recommendations (a violation of Standard I[C]). Clients are lead to believe that the model only picks top performers and thus the recommendations in the report imply that they will fall into this category |
