What does A mean? How does it relate (currency?) never seen it in GIPS… Whenever an investment management firm presents its investment performance as being in compliance with the Global Investment Performance Standards (GIPS), it must state how it defines itself as a firm. Under GIPS, a firm may define itself for the purpose of claiming GIPS compliance using any of the following options EXCEPT when: A) all assets are managed to one or more base currencies. B) an investment firm, subsidiary, or division is held out to clients or potential clients as a distinct business unit. C) the subsidiary or division of a company claims GIPS compliance when the parent company is GIPS compliant. D) an entity is registered with the appropriate national regulatory authority overseeing the entity’s investment management activities. Your answer: A was incorrect. The correct answer was C) the subsidiary or division of a company claims GIPS compliance when the parent company is GIPS compliant. In order for an investment firm to claim GIPS compliance, GIPS must be applied on a firmwide basis. If the parent company is GIPS compliant, this does not automatically mean the divisions or subsidiaries are compliant. A division or subsidiary of a company would also have to comply with GIPS to be able to claim compliance. If an investment firm, subsidiary, or division is held out to clients or potential clients as a distinct business unit it can claim GIPS compliance even if the parent company is not compliant.
Seems like he thinks its a good stock but yet is selling out the clients portfolio to other clients. I see the diversified point but seems like he is not acting on THIS particular clients interests therefore violation of LOYALTY. An analyst meets with a new client. During the meeting, the analyst sees that the new client’s portfolio is heavily invested in one over-the-counter stock. The analyst has been following the stock and thinks it will perform well in the long run. The analyst arranges through a brokerage firm to simultaneously sell a large number of shares of the stock via a series of cross trades from the new client’s portfolio to various existing clients. He arranges the trades to be executed at a price that approximates the current market price. This action is: A) a violation of Standard III(A), Loyalty, Prudence, and Care. B) not in violation of the Standards. C) a violation of Standard III(B), Fair Dealing. D) a violation of Standard V(A), Diligence and Reasonable Basis. Your answer: A was incorrect. The correct answer was B) not in violation of the Standards. There is no violation. It is in the best interest of the client to be diversified and selling via a series of cross trades will likely reduce price impact costs when compared to selling directly into the market. The analyst appears to have reasonable basis for putting the securities in the accounts of other clients.
Sometimes they say you don’t need to report or say anything at others they say you should. How do you know the difference? I went back and forth between A/C. Didn’t like C but went with it because most of the time they say you don’t need to say anything… A CFA Institute member conscientiously maintains records of changes in security regulations. The member notices that his colleagues do NOT, and does NOT say anything. Is this a violation of Standard I(A)? A) Yes, because the member is bound by the Code of Ethics. B) Yes, and the member should disassociate from these colleagues. C) No, as long as the colleagues do not violate the new rules. D) No, as long as he allows the colleagues access to his files. Your answer: C was incorrect. The correct answer was A) Yes, because the member is bound by the Code of Ethics. Component three of the Code says that a member shall “Strive to maintain and improve their competence and the competence of others in the profession.” Ignoring the neglect of rule changes of others would clearly be incongruent with this component. Simply allowing the colleagues access to the files is not enough effort to constitute “striving.” As long as the colleagues do not violate the laws, the member does not have to disassociate himself from the colleagues.
JUST LIKE I SAID>…this case he doesn’t need to say anything… Jane Dawson, CFA, an analyst at a New York brokerage firm, suspects that Bob Boatman, CFA, another analyst at the same firm, has violated a state securities law. According to the CFA Institute Standards of Professional Conduct, Dawson is: A) NOT required to report the violation to the appropriate governmental or regulatory organizations. B) required to report the suspected violation to CFA Institute. C) required to report the suspected violation to the appropriate state regulatory agency. D) required to report the suspected violation to the Securities and Exchange Commission. Your answer: A was correct! The Code and Standards do not require that members report legal violations to the appropriate governmental or regulatory organizations, but such disclosure may be prudent in certain circumstances. Dawson should consult legal counsel and disassociate from the activity.
Sanyaiz-i think in the first question posted, Answer A refers to the fact that GIPS encourages firms to adopt the broadest, most meaningful definition of the FIRM including all geographical offices, etc. My take is that “all assets are managed to one or more base currencies” implies that the firm is defining it self by everything the manage. Question 2 i remember getting wrong for the same reason–fairness is what i thought then–I think it is a BULLSH@$& question. Q3 and 4 i sorta agree with you…but 3 we need to know the code and that we are bound to maintain competence and improve the competence of others–i guarantee you will see something like that one and know the answer. Q4 i remember seeing a different one and the flow is consult legal counsel and disassociate, then go to authorities (my inclination would be to rat the guy out, but i’m old school.) There is another situation where the wording is “suspect” and the answer is “go to compliance.”
petetini Thank you for your input, it helped me out! I will post more that seem to be borderline.
the word here on Q4 is “suspects”, so the right thing to do would be to consult the legal counsel, than dissociate. Analysts are not required to report to SEC (not by the standards)