- 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
According to the Global Investment Performance Standards (GIPS), which of the following statements are correct when a firm starts to comply with the GIPS?
II. The firm, when starting to comply with the GIPS, must present at least ten years of historical performance.
III. If the firm has not been around for the correct time period, it must show its performance since its inception.
IV. After it has disclosed its results for a five-year period, the firm must then disclose results for the next five-year period as well.
I. The firm, when starting to comply with the GIPS, must present at least five years of historical performance.
II. The firm, when starting to comply with the GIPS, must present at least ten years of historical performance.
III. If the firm has not been around for the correct time period, it must show its performance since its inception.
IV. After it has disclosed its results for a five-year period, the firm must then disclose results for the next five-year period as well.
Correct Answer: I and III
IV is incorrect: After it shows GIPS-compliant history for a minimum of five years, a firm must subsequently build toward a 10-year compliance track record.
II is incorrect: Performance of five years must be presented.
IV is incorrect: After it shows GIPS-compliant history for a minimum of five years, a firm must subsequently build toward a 10-year compliance track record.
User Contributed Comments 12
| User | Comment |
|---|---|
| Jeanette | firms claiming GIPS compliance provide investors with assurance that performance is reported completely and fairly. GIPS compliance gives investors confidence in the integrity of performance presentations and facilitates the comparison of performance presentations among firms that claim GIPS compliance. |
| cbb1 | IV: after a firm has shown its five year period, GIPS requires adding each year until 10 years is available. |
| sunilcfa | its not just disclosure but compliance |
| Slothrop | The official CFA materials also says that only investment management firms that "actually manage assets" can claim compliance with GIPS. |
| Khadria | I think III is incorrect because in the notes it says "...except for composites which have been in existence for less than five years in which case composite performance since inception must be presented". So its the COMPOSITES and not the FIRM which can be considered if it is less than 5 yrs old. What do you think? |
| studyprep | III is correct and so does I. You need a firm first. And when firm makes a claim then firms to need to produce its performance records since the inception of each composite universes it manages. |
| viannie | Who can claim compliance? 1) Investment management firms that actually manage assets can choose to claim compliance to GIPS. 2) Compliance is a firm-wide process. Either 100% in compliance or 0% compliance. Who cannot claim compliance? Plan sponsors or consultants or software vendors because they do not manage assets. They either influence / support an investment firm who manage assets to claim compliance |
| ChrisHam | Only investment management firms who actually manage assets can claim compliance. Both investment management firms and prospective clients benefit from the compliance as historical track record is both complete and fairly represented, and investors have higher level confidence in integrity of performance. |
| Gooner7 | good point sunilcfa |
| thrth | whether CFA members/charterholders and candidates must comply with GIPS or just voluntarily comply ? |
| vatsal92 | @thrth: It is voluntary in nature. |
| MapherRdz | But it says COMPOSITES so, you can't infer that for the Firm is the same. |