Ethics / GIPS Inconsistencies

CFA Level III Ethics
#1

I’ve been tripped up a few times with the inconsistencies between ethics and GIPS. Let’s get a thread going to capture these.

Here’s two that come to mind:

Benchmarks in performance presentation:

  • Ethics: No requirement to provide the benchmark in performance presentation
  • GIPS: You are required to provide a description of the benchmark: must disclose if a custom or a combination of benchmarks was used.

Terminated accounts:

  • Ethics: No defined timeline for how long the terminated account must be included in past performance (presume indefinitely?)
  • GIPS: Terminated accounts must remain in the composite for 5 years.

Will post more as they come to mind.

#2

Simulated performance history:

  • Ethics: Allowed, must be disclosed.
  • GIPS: Not allowed.
#3

This is not a Ethics vs GIPS issues, more like Ethics vs Ethics thingy:

Additional compensation --> written approval required from employer.

Going into independent practice --> approval (not necessary in writing) required from employer.

How messed up is this? Do we assume that someone is opening an independent practice and will not receive any compensation for it?

#4

Are you sure about this? I thought it must stay in forever.

#5

That’s what Meldrum said in his Gips review video. He’s usually spot on.

#6

wouldn’t that be survivorship bias?

#7

Lol or overconfidence

#8

I’ll have to check that now you pointed it out. Seems highly testable.

#9

Provisions I.0.A.9–11: …" firms must provide a list of composite descriptions to any prospective client asking for such information, and they must provide upon request a compliant presentation for any composite listed. Discontinued composites must remain on the list for at least five years after their termination date."