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CFA Level I · CFA Level I Exam · Guidance for Standard III: Duties to Clients

An analyst at an investment firm that does not comply with the GIPS standards prepares a performance presentation for prospective clients. Which approach is most likely consistent with Standard III(D)?

Presenting the returns of a composite of similar portfolios is most consistent with Standard III(D). The standard calls for composite performance rather than a single representative account, and for terminated accounts to be included, so that the presentation is fair, accurate, and complete.

  1. AShowing the returns of the single best-performing account
  2. BPresenting the returns of a composite of similar portfoliosCorrect
  3. CDropping terminated accounts from the performance history

Explanation

Standard III(D) compliance practices for firms not complying with GIPS include presenting the performance of a composite of similar portfolios rather than a single representative account. They also include terminated accounts in the composite history. The other two approaches would make the presentation unfair and incomplete.

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