Comment any ethical issue in this case and state IMA Statement of Ethical Professional Practice could be applied to the ethical issue.

Special Activities SA 22-1 Jeff Zengel is a financial consultant to Rae Properties Inc., a real estate syndicate. Rae Ethics and profes- Properties Inc. finances and develops commercial real estate (office buildings). The com- sional conduct in business pleted projects are then sold as limited partnership interests to individual investors. The syndicate makes a profit on the sale of these partnership interests. Jeff provides financial information for the offering prospectus, which is a document that provides the financial and legal details of the limited partnership offerings. In one of the proj- ects, the bank has financed the construction of a commercial office building at a rate of 8% for the first four years, after which time the rate jumps to 12% for the remaining 21 years of the mortgage. The interest costs are one of the major ongoing costs of a real estate project. Jeff has reported prominently in the prospectus that the break-even occur pancy for the first four years is 60%. This is the amount of office space that must be leased to cover the interest and general upkeep costs over the first four years. The 60% break-even is very low and thus communicates a low risk to potential investors. Jeff uses the 60% break-even rate as a major marketing tool in selling the limited partner- ship interests. Buried in the fine print of the prospectus is additional information that would allow an astute investor to determine that the break-even occupancy will jump to 90% after the fourth year because of the contracted increase in the mortgage inter- investment. est rate. Jeff believes prospective investors are adequately informed as to the risk of the