Separately managed account (SMA) and GIPS

SMA should be included in GIPS composite, correct?

but my question is since investor owns the individual securities directly and can potentially express individual constraints or preferences within the portfolio, does portfolio manager still have discretion to the account? if not how can it be included in GIPS composite?

“The firm must not exclude the performance of actual wrap fee/SMA portfolios
when presenting performance to wrap fee/SMA prospective clients.”

Look at the IPS - Where does the discretion live? with the client or advisor.