Reading 4: Global Investment Performance Standards (GIPS?)-L 2010, Investment, countries, standards, reporting

bmaggie

Session 1: Ethical and Professional Standards
Reading 4: Global Investment Performance Standards (GIPS^?)

LOS c: Explain how the GIPS standards are implemented in countries with existing standards for performance reporting and describe the appropriate response when the GIPS standards and local regulations conflict.

 

 

 

Which of the following statements regarding GIPS is least accurate?

A) A GIPS objective is to promote global “self-regulation.”

B) To stay GIPS compliant, a firm must abide by GIPS guidelines even when conflicting with local or country-specific regulations.

C) GIPS allows clients to have more confidence in reported performance.

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To stay GIPS compliant, firms are required to comply with local laws even if they conflict with GIPS. However, the discrepancy must be disclosed.

bmaggie

The Global Investment Performance Standards (GIPS) were designed to be applied with the goal of full disclosure and fair representation of investment performance in all instances EXCEPT:

A) when a composite includes nondiscretionary funds to which the GIPS are not applicable.

B) when applicable local laws or regulations conflict with the GIPS, in which case, firms must comply with local laws and fully disclose the conflict.

C) when a firm or composite has been in existence for less than five years, in which case, less stringent standards apply.

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In the case of a conflict, GIPS require that firms comply with local or country-specific laws or regulations rather than GIPS, but must fully disclose the nature and scope of the conflict.

bmaggie

The El Rey Investment Company, located in Barcelona, Spain, is in the process of adopting the Global Investment Performance Standards (GIPS) for the current fiscal year. One of the GIPS standards is in direct conflict with Spanish investment reporting regulations. In order to be in full compliance with GIPS, El Rey must:

A) comply with the GIPS standard and make full disclosure of the conflict.

B) choose either the GIPS standard or the local regulation, whichever is the more conservative approach, and make full disclosure of the conflict.

C) comply with the local regulation and make full disclosure of the conflict.

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A GIPS requirement is that firms comply with the local law and make full disclosure of the conflict.

bmaggie

According to the Global Investment Performance Standards (GIPS), where existing laws or regulations already impose performance presentation standards, firms:

A) that comply with local requirements will be in compliance with GIPS as long as the scope and nature of the conflict is fully disclosed.

B) must comply with the GIPS standards, because they are the globally accepted standards for the investment industry.

C) are strongly encouraged to comply with the GIPS standards in addition to those local requirements.

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Firms are encouraged, though not required, to comply with both GIPS and the local requirements, and also disclose any local laws and regulations that conflict with the GIPS standard. Note that this question is not asking about local laws that are in conflict with GIPS, but simply about local laws that exist.

zaestau

 c

gaoflex

Thank you!