R04 Introduction To The Global Investment Performance Standards (GIPS)

Question #1 of 19 Question ID: 1203814
Which of the following statements about a GIPS-compliant rm's veri cation of GIPS compliance is most
accurate? Veri cation is:
A) required, and may be performed by the rm’s internal auditors.
B) required, and must be performed by an independent third party.
C) optional, but if chosen it must be performed by an independent third party.
The Global Investment Performance Standards (GIPS) apply to which of the following parties?
A) The chief compliance o cer for a regional money manager.
B) A software rm that developed a software package that assists investment rms in achieving GIPS
compliance.
C) An investment management rm located in Indonesia.
In 1995, the CFA Institute sponsored and funded the Global Investment Performance Standards (GIPS) in
response to:
A) both of the reasons listed here.
B) an increase in insider trading.
C) a need to address issues, such as portability of investment results.
The purpose of composites in a GIPS-compliant performance presentation is to:
A) present overall rm performance in a single statistic that is comparable across rms.
B) provide information about a rm’s performance in various asset classes.
C) clearly distinguish the entity that is presented to the public as a GIPS-compliant rm.
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Compliance with the CFA Institute Performance Presentation Standards (PPS) or the Global Investment
Performance Standards (GIPS) is:
A) required by the Code of Conduct.
B) the only way to comply with Standard III(D), Performance Presentation.
C) the best way to comply with Standard III(D), Performance Presentation.
The Global Investment Performance Standards (GIPS) were designed to apply primarily to which of the
following groups?
A) Investment rms located in the 21 countries that have contributed signi cantly to promoting and
developing the GIPS.
B) Investment management rms located in countries without locally accepted investment standards
already in place.
C) Investment management rms located worldwide that seek to comprehensively and accurately
present historical investment performance.
Lora Murphy has an account at Ferrell Investments, a GIPS-compliant rm. Murphy invests in small-cap value
stocks and pays Ferrell a standard fee to execute her buy and sell orders. According to GIPS, is Ferrell
required to include Murphy's portfolio in their small-cap value stock composite?
A) No, because constructing composites is voluntary.
B) No, because the portfolio is non-discretionary.
C) Yes, because the portfolio is fee-paying.
A good way to describe the Global Investment Performance Standards (GIPS) is a:
A) screening mechanism for determining appropriate international investments.
B) common yardstick for means of comparison.
C) legal doctrine with criminal penalties.
Which of the following statements most accurately describes veri cation under the Global Investment
Performance Standards (GIPS)? GIPS veri cation:
A) is required for a rm to claim GIPS compliance.
B) requires a veri cation report to be issued for the entire rm.
C) requires veri cation of individual composites.
Which of the following statements most accurately describes why the Global Investment Performance
Standards (GIPS) were created? To:
A) provide comparability of performance results among nations for which no presentation guidelines
currently exist.
B) meet the need for a single globally accepted set of regulatory guidelines among developed securities
markets.
C) meet the need for a single globally accepted set of investment performance presentation standards.
Which of the following statements regarding CFA Institute Global Investment Performance Standards (GIPS)
is CORRECT? A rm that employs members of CFA Institute:
A) must comply with the GIPS only within the United States.
B) is not required to conform to the GIPS.
C) must choose to comply with either the Performance Presentation Standards (PPS) or GIPS.
If the Chief Investment O cer of an investment advisory rm also is a CFA charterholder, which of the
following statements is CORRECT?
A) All performance results that are presented must comply with the CFA Institute Global Investment
Performance Standards.
B) The rm must comply with the CFA Institute Global Investment Performance Standards only if it
states that it follows the Standards.
C) The rm must present an historical composite.
Which of the following statements most accurately describes the requirements for GIPS veri cation?
A) Veri cation of GIPS compliance is recommended, but not required.
B) Third-party veri cation is required for a rm to claim compliance with GIPS.
C) A rm must select a representative set of composites for third-party GIPS veri cation.
As countries adopt the Global Investment Performance Standards (GIPS), which of the following is least likely
to occur?
A) The trend toward cross border investments will decline.
B) Existing and potential clients will be able to make fair and unambiguous comparisons among
investment rms.
C) Competition in the global investment industry will be enhanced.
Which of the following best describes the underlying principles upon which the Global Investment
Performance Standards (GIPS) are based?
A) Uniformity and consistent application of standards for the global regulation of the securities
industry.
B) Fair and consistent application of a global set of regulatory requirements.
C) Full disclosure and fair representation of performance results.
When measuring and presenting their investment performance, GIPS compliant rms are required to:
A) exclude time periods that are unrepresentative of the rm's performance history.
B) disclose the performance of the best-performing accounts in each composite.
C) include terminated accounts in their performance history.
When verifying a rm's compliance with Global Performance Investment Standards (GIPS), the veri er must:
A) clearly identify the composites for which veri cation has been performed.
B) disclose whether the veri cation was performed by the rm’s internal auditors or a third party.
C) attest that the rm’s processes and procedures are established to present performance in
accordance with GIPS requirements.
Viroqua DeSoto, CFA, is reading a discussion in an online forum about the construction and purpose of
composites in performance reporting. She nds these statements from participants:
Statement 1: The purpose of composites is to let investors know how well a rm has performed managing
di erent types of securities or investment strategies.
Statement 2: A managed portfolio should have a performance history of at least one year before the rm
assigns it to a composite.
With respect to both statements:
A) both are correct.
B) both are incorrect.
C) only one is correct.
McGregor Investment Management promotes itself as a xed-income investment management rm. The vast
majority of the portfolios it manages are xed-income portfolios. McGregor does, however, manage a few
portfolios, utilizing a growth equity investment strategy, but the rm has no intention of ever promoting this
strategy. Under the Global Investment Performance Standards (GIPS), must these portfolios be included in a
composite?
A) Yes, because the portfolios are managed to a widely recognized investment strategy.
B) Yes, because the portfolios are discretionary and fee paying.
C) No, because the rm does not normally manage portfolios to a growth equity strategy and is not
planning to promote it.

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Question #1 of 19 Question ID: 1203814

accurate? Veri cation is:

A) required, and may be performed by the rm’s internal auditors.

B) required, and must be performed by an independent third party.

C) optional, but if chosen it must be performed by an independent third party.

Question #2 of 19 Question ID: 1152208

A) The chief compliance o cer for a regional money manager.

C) An investment management rm located in Indonesia.

Question #3 of 19 Question ID: 1203807

A) both of the reasons listed here.

B) an increase in insider trading.

C) a need to address issues, such as portability of investment results.

Question #4 of 19 Question ID: 1203811

The purpose of composites in a GIPS-compliant performance presentation is to:

A) present overall rm performance in a single statistic that is comparable across rms.

B) provide information about a rm’s performance in various asset classes.

Performance Standards (GIPS) is:

A) required by the Code of Conduct.

B) the only way to comply with Standard III(D), Performance Presentation.

C) the best way to comply with Standard III(D), Performance Presentation.

Question #6 of 19 Question ID: 1203802

Question #7 of 19 Question ID: 1203812

A) No, because constructing composites is voluntary.

B) No, because the portfolio is non-discretionary.

C) Yes, because the portfolio is fee-paying.

Question #8 of 19 Question ID: 1203809

A good way to describe the Global Investment Performance Standards (GIPS) is a:

A) screening mechanism for determining appropriate international investments.

B) common yardstick for means of comparison.

C) legal doctrine with criminal penalties.

A) is required for a rm to claim GIPS compliance.

B) requires a veri cation report to be issued for the entire rm.

C) requires veri cation of individual composites.

Question #10 of 19 Question ID: 1203804

Question #11 of 19 Question ID: 1203806

is CORRECT? A rm that employs members of CFA Institute:

B) is not required to conform to the GIPS.

Question #12 of 19 Question ID: 1203801

C) The rm must present an historical composite.

A) Veri cation of GIPS compliance is recommended, but not required.

B) Third-party veri cation is required for a rm to claim compliance with GIPS.

Question #14 of 19 Question ID: 1203808

A) The trend toward cross border investments will decline.

C) Competition in the global investment industry will be enhanced.

Question #15 of 19 Question ID: 1203805

B) Fair and consistent application of a global set of regulatory requirements.

C) Full disclosure and fair representation of performance results.

Question #16 of 19 Question ID: 1152202

B) disclose the performance of the best-performing accounts in each composite.

C) include terminated accounts in their performance history.

Question #18 of 19 Question ID: 1152207

With respect to both statements:

A) both are correct.

B) both are incorrect.

C) only one is correct.

Question #19 of 19 Question ID: 1203810

B) Yes, because the portfolios are discretionary and fee paying.

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