Ethical And Professional Standards - Ethical And Professional Standards Section 2
- Option : B
- Explanation : The documents related to the screening model are a property of Reliable Investments and not that of Kaushal’s because they were developed using the resources of the company while employed there. Refer to Standard IV(A) Loyalty.
- Option : B
- Explanation : Sorkin must disclose his ownership of the Canc stock to his employer and in his follow-up report. But the best course of action to avoid any conflict of interest would be to ask his employer to assign the stock to another analyst. Refer to Standard VI(A) Disclosure of Conflicts.
- A
Presenting performance for time periods irrespective of performance in such a way that it enhances comparability with other firm’s results.
- B
Selecting all portfolios while presenting the firm’s investment results for a specific mandate.
- C
Excluding portfolios with poor performance that no longer exist.
- Option : C
- Explanation : Excluding portfolios with poor performance is known as survivorship bias – an often seen misleading practice.
- A
Selecting all portfolios while presenting the firm’s investment results for a specific mandate.
- B
Selecting a top-performing portfolio to represent the firm’s overall investment results for a specific mandate.
- C
Selecting all portfolios for a selected time period during which the mandate outperformed its benchmark.
- Option : A
- Explanation : Selecting top-performing portfolios is a misleading practice known as representative accounts. Presenting performance for a selected time period when the mandate outperformed the benchmark is also a misleading practice.
55. The objective of creating GIPS standards was:
- A
to increase comparability among investment management firms based on standardized rules within a country.
- B
to establish global, standardized, industry-wide rules for calculating and presenting investment performance.
- C
to communicate all relevant information regarding the company and industry forecasts to existing clients.
- Option : B
- Explanation : C is incorrect because the objective is to communicate all relevant information of historical results to prospective clients.
