LiquidAssets10

Which of the following statements is a key characteristic of Global Investment Performance Standards (GIPS)?

A) GIPS exist as a minimum worldwide standard where local or country-specific law, regulation, or industry standards may not exist for investment performance measurement and/or presentation.

B) GIPS require firms to show GIPS-compliant history for a minimum of ten years, or since inception of the firm or composite if in existence less than ten years.

C) GIPS require managers to include all actual fee-paying and non-fee-paying discretionary portfolios in composites defined according to similar strategy and/or investment objective.

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The GIPS standards: (1) do not require managers to include non-fee-paying accounts in composites, (2) require five years of GIPS compliant history, and (3) require compliance with local laws when they conflict with GIPS and disclosure of the conflict.

LiquidAssets10

Each of the following is an objective of the Global Investment Performance Standards (GIPS) EXCEPT:

A) to promote fair, global competition among investment firms that adopt GIPS and to create barriers to entry for new firms that do not.

B) to foster the notion of industry self-regulation on a global basis.

C) to obtain worldwide acceptance of a standard for the calculation and presentation of investment performance in a fair, comparable format that provides full disclosure.

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GIPS Objectives:

• Establish global, industry-wide best practices for the calculation and presentation of investment performance, so that performance presentations for GIPS-compliant firms can be compared regardless of their country location.
• Facilitate the accurate and unambiguous presentation of investment performance results to current and prospective clients.
• Facilitate a comparison of the historical performance of investment management firms so that clients can make educated decisions when hiring new managers.
• Encourage full disclosure and fair global competition without barriers to entry.
• Encourage self-regulation.

LiquidAssets10

Each of the following is an objective of the Global Investment Performance Standards (GIPS) EXCEPT:

A) to broaden the application and acceptance of the performance presentation guidelines of foreign and domestic regulatory entities.

B) to facilitate the accurate and unambiguous presentation of investment performance results to current and prospective clients.

C) to encourage full disclosure and fair global competition without barriers to entry.

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GIPS Objectives:

• Establish global, industry-wide best practices for the calculation and presentation of investment performance, so that performance presentations for GIPS-compliant firms can be compared regardless of their country location.
• Facilitate the accurate and unambiguous presentation of investment performance results to current and prospective clients.
• Facilitate a comparison of the historical performance of investment management firms so that clients can make educated decisions when hiring new managers.
• Encourage full disclosure and fair global competition without barriers to entry.
• Encourage self-regulation.

LiquidAssets10

Each of the following is one of the objectives of the Global Investment Performance Standards (GIPS) EXCEPT:

A) to encourage self-regulation.

B) to obtain worldwide awareness of country-specific standards for the calculation and presentation of investment performance.

C) to encourage full disclosure and fair global competition without barriers to entry.

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GIPS Objectives:

• Establish global, industry-wide best practices for the calculation and presentation of investment performance, so that performance presentations for GIPS-compliant firms can be compared regardless of their country location.
• Facilitate the accurate and unambiguous presentation of investment performance results to current and prospective clients.
• Facilitate a comparison of the historical performance of investment management firms so that clients can make educated decisions when hiring new managers.
• Encourage full disclosure and fair global competition without barriers to entry.
• Encourage self-regulation.

LiquidAssets10

Which of the following is NOT an objective of the Global Investment Performance Standards (GIPS)?

A) To encourage self-regulation.

B) To encourage full disclosure and fair global competition without barriers to entry.

C) To obtain worldwide recognition by securities regulators of a standard for the calculation and presentation of investment performance in a fair, comparable format that provides full disclosure.

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GIPS applies to investment management firms and is intended to serve the existing and prospective clients of investment management firms, not regulators.

LiquidAssets10

Which of the following is NOT a key characteristic of the Global Investment Performance Standards (GIPS)? GIPS:

A) require managers to include all actual fee-paying and non-fee-paying discretionary portfolios in composites defined according to similar strategy and/or investment objective.

B) require firms to use certain calculation and presentation methods and to make certain disclosures along with the performance record.

C) do not address every aspect of performance measurement, valuation, attribution, or coverage of all assets.

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The GIPS do not require managers to include non-fee-paying accounts in composites (Standard 3.A.1).

LiquidAssets10

Which of the following is NOT a key characteristic of the Global Investment Performance Standards (GIPS)? GIPS:

A) require managers to include all actual fee-paying and non-fee-paying discretionary portfolios in composites defined according to similar strategy and/or investment objective.

B) require firms to use certain calculation and presentation methods and to make certain disclosures along with the performance record.

C) do not address every aspect of performance measurement, valuation, attribution, or coverage of all assets.

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The GIPS do not require managers to include non-fee-paying accounts in composites (Standard 3.A.1).

LiquidAssets10

Which of the following compliance statements is most acceptable under the Global Investment Performance Standards (GIPS)?

A) [Insert name of firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®).

B) [Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has not been independently verified.

C) [Insert name of firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®) and the CFA Institute.

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GIPS mandates that firms use the following compliance statement when claiming compliance with the Standards and when the firm has not been verified: [Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has not been independently verified.
For firms that are verified:
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has been independently verified for the periods [insert dates]. The verification report(s) is/are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
For composites of a verified firm that have also had a performance examination:
[Insert name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of firm] has been independently verified for the periods [insert dates]. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The [insert name of composite] composite has been examined for the periods [insert dates]. The verification and performance examination reports are available upon request.
Note the registered trademark symbol (®). There is no such thing as partial compliance and CFA Institute should not be referenced.

LiquidAssets10

Whenever an investment management firm presents its investment performance as being in compliance with the Global Investment Performance Standards (GIPS), it must state how it defines itself as a firm. Under GIPS, a firm may define itself for the purpose of claiming GIPS compliance using any of the following options EXCEPT when:

A) the subsidiary or division of a company claims GIPS compliance when the parent company is GIPS compliant.

B) all assets are managed to one or more base currencies.

C) an investment firm, subsidiary, or division is held out to clients or potential clients as a distinct business unit.

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In order for an investment firm to claim GIPS compliance, GIPS must be applied on a firmwide basis. If the parent company is GIPS compliant, this does not automatically mean the divisions or subsidiaries are compliant. A division or subsidiary of a company would also have to comply with GIPS to be able to claim compliance. If an investment firm, subsidiary, or division is held out to clients or potential clients as a distinct business unit it can claim GIPS compliance even if the parent company is not compliant.

LiquidAssets10

PTN, Inc., is an investment consulting firm. It has used Global Investment Performance Standards (GIPS) since its inception two years ago. PTN claims to be in compliance with GIPS. Could this statement be CORRECT?

A) No, PTN does not have a five-year compliance track record.

B) No, consulting firms cannot be GIPS compliant.

C) Yes, PTN does not have a five-year track record, so since inception is sufficient.

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Only investment management firms may claim compliance with GIPS because they actually manage the assets for which performance is reported.