LOS u: State and explain the requirements for compliance with the GIPS Advertising Guidelines.

Q1. Brown and Brown Associates is a money management firm that is advertising that it is GIPS compliant. In its advertisements, the statement that the firm can use in claiming compliance is:

A)   “Brown and Brown Associates claims compliance with the Global Investment Performance Standards (GIPS?)”.

B)   “Brown and Brown Associates prepares and presents their reports in compliance with the Global Investment Performance Standards (GIPS?)”.

C)   “CFAI confirms that Brown and Brown Associates are in compliance with the Global Investment Performance Standards (GIPS?)”.

Q2. White and White Associates (WWA) is a money management firm that is planning to advertise that it is GIPS compliant. In the advertisement, WWA may include performance results:

A)   only if WWA includes further information such as the strategy of the composite being advertised.

B)   and do not have to include any additional information concerning the performance.

C)   only if there has been third-party verification.

Q3. Black and Black Associates (BBA) is a money management firm that is advertising that it is GIPS compliant. BBA actively employs derivatives and leverage, and these tools have a material affect on composite returns. With respect to describing their use of these tools in their advertisements, BBA:

A)   Need not mention neither leverage nor derivatives.

B)   Must do so with respect to derivatives but not leverage.

C)   Must do so with respect to both derivatives and leverage.

LOS u: State and explain the requirements for compliance with the GIPS Advertising Guidelines. fficeffice" />

Q1. Brown and Brown Associates is a money management firm that is advertising that it is GIPS compliant. In its advertisements, the statement that the firm can use in claiming compliance is:

A)   “Brown and Brown Associates claims compliance with the Global Investment Performance Standards (GIPS?)”.

B)   “Brown and Brown Associates prepares and presents their reports in compliance with the Global Investment Performance Standards (GIPS?)”.

C)   “CFAI confirms that Brown and Brown Associates are in compliance with the Global Investment Performance Standards (GIPS?)”.

Correct answer is A)

The correct statement is “Brown and Brown Associates claims compliance with the Global Investment Performance Standards (GIPS?)”.

Q2. White and White Associates (WWA) is a money management firm that is planning to advertise that it is GIPS compliant. In the advertisement, WWA may include performance results:

A)   only if WWA includes further information such as the strategy of the composite being advertised.

B)   and do not have to include any additional information concerning the performance.

C)   only if there has been third-party verification.

Correct answer is A)

Guideline B.4 stipulates that any advertisement that includes performance results must also include additional information such as the strategy of the composite being advertised.

Q3. Black and Black Associates (BBA) is a money management firm that is advertising that it is GIPS compliant. BBA actively employs derivatives and leverage, and these tools have a material affect on composite returns. With respect to describing their use of these tools in their advertisements, BBA:

A)   Need not mention neither leverage nor derivatives.

B)   Must do so with respect to derivatives but not leverage.

C)   Must do so with respect to both derivatives and leverage.

Correct answer is C)        

Guideline B.9 stipulates that the use of both derivatives and leverage must be described under these conditions.

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