Reading 4: Global Investment Performance Standards (GIPS) -

Investment, statements, following, regarding, least

Q1. Which of the following statements regarding GIPS is least accurate?

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

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

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

Q2. 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 applicable local laws or regulations conflict with the GIPS, in which case, firms must comply with local laws and fully disclose the conflict.

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

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

Q3. 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.

Q4. 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.