These are 3 questions from Schweser, ethical and professional standards Qbank December 2001 CFA level 1 exam. I probably shouldnt post the materials but … Anyways, these answers contradict for GIPS. One saying it is the maximum standard, 2 saying it is the minimum standard. Which is it? Dont mind I answered the questions wrong, I just wanted to show the correct answer so I picked something.
Quiz Review - Question 5
Question ID#: 94913
Which of the following statements regarding the Global Investment Performance Standards (GIPS) is CORRECT? The GIPS standards:
A)
are considered to be the minimum global standard for historical performance presentation.
B)
represent the highest performance measurement and presentation practice worldwide.
C)
are designed to supplement local standards of historical performance presentation in countries around the world.
Your answer: C was incorrect. The correct answer was B) represent the highest performance measurement and presentation practice worldwide.
GIPS are envisioned as being “the” standard worldwide, and would eliminate the need for separate local standards. The CVG approach is currently utilized, but the goal is to converge all standards globally and eliminate the need for CVGs.
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Quiz Review - Question 4
Question ID#: 94941
Which of the following statements regarding Global Investment Performance Standards (GIPS) is _most_accurate?
A)
GIPS requires that all fee-paying discretionary portfolios be included in composites defined according to investment objective or similar strategy and firms must show GIPS compliant history for a minimum of five years or since inception if a composite has existed less than five years.
B)
GIPS exists as a best or maximum worldwide standard where local or country specific law for investment performance measurement does not exist.
C)
GIPS is intended to foster the notion of a world-wide regulatory body to oversee investment performance and measurement on a global scale.
Your answer: A was correct!
GIPS provides a minimum, not a maximum, standard for investment performance measurement and/or presentation. GIPS requires that all fee-paying discretionary portfolios be included in a composite, not rank ordered, to prevent firms from presenting the results of their best portfolios. GIPS is intended to foster the notion of self-regulation, not a world-wide regulatory body, to oversee investment performance and measurement.
Quiz Review - Question 2
Question ID#: 94970
Which of the following statements is a key characteristic of Global Investment Performance Standards (GIPS)?
A)
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.
B)
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.
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.
Your answer: A was incorrect. The correct answer was B) 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.
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.