Another ethics question:
A money management firm has been in existence for seven years. In order to be GIPS compliant..
a) it’s records must go back tot he inception of the firm
b) it’s records must go back to the inception of the firm and carry forward three more years
c) it’s records must go back five years and carry forward an additional five years
well, the answer is “A”, which is true because to claim GIPS compliance, if you go back to the inception of the firm bingo bango you got it. HOWEVER, both the methods in “B” and “C” are correct, being bo back 7 then forward 3, or back 5 forward 5. You have to go back 5 at a minimum, and then forward so that 10 years are covered (back 5, forward 5, back 4, forward 6 etc) Why are “B” and “C” wrong? Is it becuase it says they “MUST” do this, when in reality they “MAY” do something else? or is it because the question is worded in a way that the firm wants to claim GIPS compliance TODAY, this second, in which case the only way they could do that would be to go back to inception.
Please provide thoughts.
MB作者: LiquidAssets10 时间: 2013-4-17 19:23
A is a definite other are minimum requirements. like in B it can carry on for more then 3 years as well.
seems tricky !!作者: karoliukas 时间: 2013-4-17 19:23
In order to be GIPS compliant, a firm must present 5 yrs of records at a minimum or since inception if the firm has been in existence less than 5 yrs. Once the firm is in compliant for 5 yrs, it must show records of up to 10 yrs at a minimum.
So, in the case above, the firm has been in existence for 7 yrs, which means the firm must show a minimum of 5 yrs worth of records and additional 2 years which is really since inception. B and C are inaccurate because they imply that the firm has to wait until 10 years worth of records are accumulated before being compliant, which is not true.作者: redskins44 时间: 2013-4-17 19:23
oh ok yup that make sense!
Thanks for clearing me as well.作者: hardwork24 时间: 2013-4-17 19:23
I’m ashamed. Even after taking the exam I was wondering why C is not the answer, until I read Sujans post.
