- CFA Exams
- CFA Level I Exam
- Topic 10. Ethical and Professional Standards
- Learning Module 72. Introduction to the Global Investment Performance Standards (GIPS)
- Subject 4. Fundamentals of Compliance
CFA Practice Question
There are 356 practice questions for this topic.
CFA Practice Question
After eight years of claiming compliance, a firm has to present a minimum ______-year performance.
Explanation: A firm must present additional annual performance up to ten years (at a minimum) after the firm presents five years of compliance history.
User Contributed Comments 15
|Yooo||How does a firm present ten years if it is in existence for 8 years? Obviously, the goal is to have 10-year compliant track-record?|
|torture||Note the firm has claimed compliance for 8 years, not it has existed for 8 years!|
|anuman||How can the firm which has claimed compliance for 8 years but only has 9 years of history in total present 10 years record?|
|mary||good question. It's stated so in the GIPS this way. Maybe we should ask CFA Institute for an explanation?|
|pjudin||guys, you need to be more attentive: the firm has to build towards a 10 year compliance recored..
p.s. I got this question wrong..
|wollogo||The firm needs to have 5 years of performance data to initially claim compliance, therefore after 5 years of claiming compliance the firm should have 10 years of performance data.
However the firm can also present performance 'since inception' e.g. if a company has been GIPS compliant for 5 years but has introduced a new fund/composite 2 years ago then obviouslly they can only present 2 years of data. My interpretation is that they would still be compliamt as long as the calculation methods used are GIPS compliant.
|akanimo||In the first year of compliance a firm must have 5yrs of data to claim compliance b/cos the standard requires minimum of 5yrs data (GIPS i)
Follow the math:
- Year 1 : 5 years data
- Year 2 : 6 years data
- Year 3 : 7 years data
- Year 6 : 10 years data
- Year 7 : 11 years data
- Year 8 : 12 years data
However the GIPS i standard only requires that 10yrs of data be presented so from Year 7 they are allowed to drop off the oldest year data and present last 10yrs
|valeris||I think that 8 can still be the right answer if:
The firm has been reporting in accordance with GIPS from the inception. That still counts as compliance as long as they note "since inception".
Year 1: 1 year of data
Year 2: 2 years of data
Year 8: 8 years of data
|surob||From the given information, it is reasonable to assume that the firm has already been compliant with GIPS for 5 yrs, per the GIPS requirement. After 5 yrs of compliance, the firm can claim itself as GIPS comliant firm. So, as far as they are claiming 8 yrs of compliance, they should be actually complying with GIPS for 13yrs. Thus, they can claim 10 yr comliance with GIPS without question. Note that the first 3 yrs of historical performance/data is no longer needed to present for compliance purposes. Hopefully, it makes sense to everybody.|
|motoloco||I got C, but i agree with valeris..if firm has been reporting from inception it also could be 8 years - therefore B is also correct|
|achu||The true 'lowest possible' min is indeed 8 years, but that's not what the question writer intended. (s)he should have written "a company which has been in business for twenty years and claiming 8 years of compliance..." . This would have resolved the issue.|
|pmulenga||Akanimo has given a comprehensive analysis and that is the reasoning behind this question. I was thrown out. Thanks|
|dand1||Dont like this.. I thought you could claim GIPS compliance if the firm is younger than 5 years but as long as the firm discloses the fact?|
|isabellaa||this is not a well formulated question... how can the company present 10 years if we're not sure they exist since 10 years?
Surob not correct the company can say compliant as of inception but needs to collect data. valeris is right
|Inaganti6||@isabella it's all semantics. They're implying that the next objective for the firm should be claim compliance for the upcoming two years.|