Another ethics question: A money management firm has been in existence for seven years. In order to be GIPS compliant… a) it’s records must go back tot he inception of the firm b) it’s records must go back to the inception of the firm and carry forward three more years c) it’s records must go back five years and carry forward an additional five years well, the answer is “A”, which is true because to claim GIPS compliance, if you go back to the inception of the firm bingo bango you got it. HOWEVER, both the methods in “B” and “C” are correct, being bo back 7 then forward 3, or back 5 forward 5. You have to go back 5 at a minimum, and then forward so that 10 years are covered (back 5, forward 5, back 4, forward 6 etc) Why are “B” and “C” wrong? Is it becuase it says they “MUST” do this, when in reality they “MAY” do something else? or is it because the question is worded in a way that the firm wants to claim GIPS compliance TODAY, this second, in which case the only way they could do that would be to go back to inception. Please provide thoughts. MB
A is a definite other are minimum requirements. like in B it can carry on for more then 3 years as well. seems tricky !!
In order to be GIPS compliant, a firm must present 5 yrs of records at a minimum or since inception if the firm has been in existence less than 5 yrs. Once the firm is in compliant for 5 yrs, it must show records of up to 10 yrs at a minimum. So, in the case above, the firm has been in existence for 7 yrs, which means the firm must show a minimum of 5 yrs worth of records and additional 2 years - which is really since inception. B and C are inaccurate because they imply that the firm has to wait until 10 years worth of records are accumulated before being compliant, which is not true.
oh ok yup that make sense! 
Thanks for clearing me as well.
I’m ashamed. Even after taking the exam I was wondering why C is not the answer, until I read Sujans post.
don’t be ashamed . It is a borderline insane question involving 2+2 kind of math , not really a test of GIPS knowledge. I was fooled exactly like you.