As a new investment adviser (ia) firm, your company wants to obtain more clients. in an attempt to do so, one of the employees suggests a one-year offer to prospective clients. the offer would refund client's management fees if the client's portfolio value did not increase by 12% at the end of the first year. this fee arrangement:

D) is not acceptable because such a guarantee would cause a conflict of interest pertaining to the IA's fiduciary duty to each client

Explanation:

The members of the North American Securities Administrators Association (NASAA) must follow their Model Rule which prohibits investment adviser firms from guaranteeing investment results, in other words they cannot guarantee a minimum profit.

In this case the employee suggested that if their clients didn't earn a minimum 12% profit, then they would refund any fees collected. But the IA firm is not allowed to guarantee the 12% value increase or profit.