Which of the following is least likely a requirement of the GIPS standards? Firms are required to:
- present a minimum of five years of annual investment performance compliant with the GIPS standards.
- include all discretionary, fee-paying portfolios in at least one composite.
- have thei...
which of the following is least likely a requirement of the gips standards firms are required to
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CFA Institute - Mock A
Which of the following is least likely a requirement of the GIPS standards? Firms are
required to:
- present a minimum of five years of annual investment performance compliant with the
GIPS standards.
- include all discretionary, fee-paying portfolios in at least one composite.
- have their performance records verified by an independent third party. - Answer C -
It is a recommendation but not a requirement that firms obtain independent third-party
verification to claim GIPS compliance.
Firms are required to include all discretionary, fee-paying portfolios in at least one
composite.
They must also present a minimum of five years of annual investment performance
compliant with the GIPS standards.
Madeline Smith, CFA, was recently promoted to senior portfolio manager. In her new
position, Smith is required to supervise three portfolio managers. Smith asks for a copy
of her firm's written supervisory policies and procedures but is advised that no such
policies are required by regulatory standards in the country where Smith works.
According to the Standards of PracticeHandbook, Smith's most appropriate course of
action would be to:
a. require her firm to adopt the CFA Institute Code of Ethics and Standards of
Professional Conduct.
b. decline to accept supervisory responsibility until her firm adopts procedures to allow
her to adequately exercise such responsibility.
c. require the employees she supervises to adopt the CFA Institute Code of Ethics and
Standards of Professional Conduct. - Answer b.
According to guidance for Standard (IV(C), if a member cannot fulfill supervisory
responsibilities because of the absence of a compliance system or because of an
inadequate compliance system, the member should decline in writing to accept
supervisory responsibility until the firm adopts reasonable procedures to allow the
member to adequately exercise such responsibility.
,After a firm presents a minimum required number of years of GIPS- compliant
performance, the firm must present an additional year of performance each year,
building up to a minimum of:
a. 10 years of GIPS
b. 15 years
c. 5 years - Answer a. 10 years
After a firm presents a minimum of five years of GIPS-compliant performance, the firm
must present an additional year of performance each year, building up to a minimum of
10 years of GIPS-compliant performance.
Nicholas Bennett, CFA, is a trader at a stock exchange. Another trader approached
Bennett on the floor of the exchange and verbally harassed him about a poorly
executed trade. In response, Bennett pushed the trader and knocked him to the ground.
After investigating the incident, the exchange cleared Bennett from any wrongdoing.
Which of the following best describes Bennett's conduct in relation to the CFA Institute
Code of Ethics or Standards of Professional Conduct? Bennett:
a. violated both the standard relating to professionalism and integrity of capital markets.
b. did not violate any of the Code of Ethics or Standards of Professional Conduct.
c. violated the standard relating to professionalism. - Answer c. violated the standard
relating to professionalism.
According to the CFA Institute Code of Ethics and Standards of Professional Conduct,
trading on material nonpublic information is least likely to be prevented by establishing:
a. personal trading limitations.
b. firewalls.
c. selective disclosure. - Answer c.
Selective disclosure occurs when companies discriminate in making material nonpublic
information public. Corporations that disclose information on a limited basis create the
potential for insider-trading violations. See Standard II(A).
Fundamental Asset Managers claims compliance with the CFA Institute Global
Investment Performance Standards (GIPS) and manages both discretionary and non-
discretionary accounts. When constructing a single composite for Fundamental, Juma
,Dzuya includes all discretionary, fee-paying accounts with both value and growth
strategies. Does the composite constructed by Dzuya most likely meet the criteria of the
GIPS standards?
a. yes
b. No, because non-discretionary accounts are not included
c. No, because of non-similar investment strategies - Answer c.
A composite must include all actual fee-paying, discretionary portfolios managed in
accordance with the same investment mandate, objective, or strategy (Standard IV-
Composites).
By including both the value and growth portfolios, the composite is made up of portfolios
with different investment mandates or strategies.
During an on-site company visit, Marsha Ward, CFA, accidentally overheard the chief
executive officer of Stargazer, Inc. discussing the company's tender offer to purchase
Dynamica Enterprises, a retailer of Stargazer products. According to the CFA Institute
Standards of Professional Conduct, Ward most likely cannot use the information
because:
a. she does not have a reasonable and adequate basis for taking investment action.
b. it was overheard and might be considered unreliable.
c. it relates to a tender offer. - Answer c.
Trading on the information is restricted given that it relates to a tender offer; it is clearly
material, nonpublic information as stated in Standard II(A).
According to the Global Investment Performance Standards (GIPS), firms must do all of
the following except:
a. adhere to certain calculation methodologies and make specific disclosures along with
their performance.
b. comply with all requirements of the GIPS standards, such as updates, guidance
statements, and clarifications.
c. provide investors with a comprehensive view of their performance only in terms of
returns. - Answer c.
, Firms must provide investors with a comprehensive view of their performance in terms
of risk and returns, not just returns.
Jeffrey Jones passed the Level I CFA examination in 1997 and the Level II examination
in 2009. He is not currently enrolled for the Level III examination. According to the CFA
Institute Standards of Professional Conduct, which of the following is the most
appropriate way for Jones to refer to his participation in the CFA Program?
a. Candidate in the CFA Institute CFA Program
b. Passed Level II of the CFA examination in 2009
c. Jeffrey Jones, CFA (expected 2014) - Answer b.
No designation exists for someone who has passed Level I, Level II, or Level III of the
CFA exam, see Standard VII(B). Persons who have passed a certain level of the exam
may state that they have completed that level.
A person can state he is a candidate only if he is currently enrolled in the CFA Program.
It is also an improper reference to use "expected" a part of the designation.
Which of the following is not a component of the CFA Institute Code of Ethics?
a. Promote financial integrity and seek to prevent and punish abuses in the financial
markets.
b. Practice and encourage others to practice in a professional and ethical manner that
will reflect credit on themselves and the profession.
c. Place the integrity of the investment profession and the interests of clients above your
own personal interests. - Answer a.
Punishing abuse in the financial markets is not one of the six components of the Code
of Ethics.
Claire Jones, CFA, is an analyst following natural gas companies in the United States.
At an industry energy conference, the chief financial officer of Alpine Energy states that
the company is interested in making strategic acquisitions. At a separate event, Alpine's
head of exploration commented that he is bullish on natural gas production prospects
within northeastern Pennsylvania. Jones is aware that Alpine currently has very little
exposure to this region. She also knows another company in her universe, Pure Energy,
Inc. is based in northeastern Pennsylvania and controls significant assets in the area.
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