CFA Reading 5

According to the Fundamentals of Compliance Requirements section of the GIPS standards, a firm must: A) include in total firm assets those assigned to a sub-advisor selected by the firm B) alter historical composite performance after a significant change in the firm's organization occurs C) represent that the calculation methodology used by the firm is "in accordance with the GIPS" when presenting performance

A

According to the fundamentals of Compliance section of the GIPS, issues that a firm must consider when claiming compliance include all of the following except: A) replicating performance B) properly defining the firm C) documenting firm policies and procedures used in establishing and maintaining compliance with the Standards.

A

The Fundamentals of Compliance section of the GIPS standards recommends that firms: A) conduct a verification B) adopt a limited definition of the firm, regardless of the actual name of the individual investment management company C) annually provide existing clients with compliant presentations for each composite on the firm's list of composite descriptions

A

To claim compliance with the GIPS standards, a firm is required to: A) adhere to certain calculation methodologies B) conduct an independent third-party verification of its claim of compliance C) a strong commitment to ethical integrity in fair representation and full disclosure

A

With respect to the Global Investment Performance Standards, which of the following is one of the nine sections containing investment performance provisions? A) Real Estate B) Derivatives C) Legal and Ethical Considerations

A

A key feature of the GIPS standards is that: A) they strive to cover the unique characteristics of each asset class B) firms must adhere to all requirements of the standards to claim compliance C) actual, discretionary, fee-paying portfolios may be excluded from a composite under limited conditions

B

The GIPS standards are instrumental in: A) enabling regulatory enforcement of investment performance reporting B) establishing best practices for calculating and presenting investment performance C) eliminating barriers to entry in markets with no investment performance standards.

B

What is the minimum period of compliant performance that a 12-year-old firm must present to comply with the GIPS standards? A) Five years B) Ten years C) Twelve years

B; After a firm presents a minimum of 5 years of compliant performance, the firm must present an additional year for each year since inception. This builds up to a minimum of 10 years.

Adherence to the GIPS standards is reinforced by: A) the sanctioning authority of sponsoring organizations B) the higher priority placed on compliance with GIPS over conflicting regulations C) a strong commitment to ethical integrity in fair representation and full disclosure

C

Which of the following statements concerning the requirements of GIPS Fundamentals of Compliance is correct? A) firms claiming compliance have full discretion over the dissemination of their compliant presentation B) firms may claim partial compliance with the standards provided the performance presented is not false or misleading C) The definition of the firm creates defined boundaries whereby total firm assets and the basis for firm-wide compliance are determined

C

G&F Advisors claims compliance with the GIPS in its marketing materials. The compliant presentation includes a footnote which indicates that the firm has been verified by an independent third party. An additional note states that G&F is in compliance with the GIPS standards except for its private equity investments. Is it likely that G&F violated the GIPS standards? A) No, because the footnotes meet the requirements of the standards B) No, because the provisions do not apply to the private equity investments C) Yes, because they cannot claim compliance unless all requirements of the Standard are met.

C ; Firms must meet all the requirements of compliance

Nine major sections of the GIPS Standards

Fundamentals of Compliance Input data Calculation methodology Disclosure Presenting and reporting Real Estate Private Equity Wrap Fee/Separately managed account portfolios