Q:
Which of the following statements is (are) true with respect
to the key characteristics of the Global Investment
Presentation Standards (GIPS)?
I. Should these Standards be more strict than local
laws, yet they are in conflict with each other, then
the managers must report two sets of performance presentation
figures.
II. A fee paying discretionary portfolio may only
be accounted for in one composite.
III. Non-discretionary portfolios should not be included
in any of the composites.
IV. Countries without established performance presentation
standards, may incorporate Global Investment Presentation
Standards into their system by way of creating a "Country
Version" of Global Investment Presentation Standards.
a) III only.
b) I and IV only.
c) I, II, and III only.
d) I, II, and IV only.
 
A:
The correct answer is: a)
(I) is incorrect. The rule is that if the Standards
are more strict than local laws, yet are in conflict
with each other, then the managers must adhere to
the local laws. However, they must simultaneously
disclose this conflict in their presentation.
(II) is incorrect. It is possible for a fee paying
discretionary portfolio to be accounted for in more
than one composite.
(III) is true. The reason why non-discretionary portfolios
should not be included in any of the composites, is
because the managers did not have full and direct
control in the investment decisions that were made
for these portfolios.
(IV) is incorrect. Countries without established performance
presentation standards, may incorporate
Global Investment Presentation Standards into their
system by way of creating a Translation of Global
Investment Presentation Standards. The "Country
Version of Global Investment Presentation Standards" is
for those countries that already have presentation
standards in place.
 

 

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