Which statement about the GIPS Fundamentals of Compliance is correct?

Which statement about the GIPS Fundamentals of Compliance is correct?

• A. Firms may claim partial compliance if the performance is not false.
• B. The definition of the firm creates defined boundaries whereby total firm assets and the basis for firm-wide compliance are determined.
• C. Disclosures must be provided to every potential client.
• D. The firm can decide to present to only a subset of clients.

Answer: (B)

Under GIPS, you must define the firm as a distinct reporting entity—the firm boundary. This boundary sets which assets are counted as total firm assets and which portfolios, composites, and performance results fall under firm-wide compliance. Because the scope of compliance is tied to that defined firm, all performance reporting and disclosures must reflect only those assets within the boundary, providing consistency and comparability across the firm’s compliant presentations. Partial compliance isn’t permitted because a firm must meet the applicable GIPS requirements in full to claim GIPS compliance. Disclosures are provided as part of the compliant presentation to prospective clients, not automatically to every potential client. And a firm shouldn’t restrict its compliant presentation to only a subset of clients; the disclosure framework is intended to be available to prospective clients within the defined process.

Under GIPS, you must define the firm as a distinct reporting entity—the firm boundary. This boundary sets which assets are counted as total firm assets and which portfolios, composites, and performance results fall under firm-wide compliance. Because the scope of compliance is tied to that defined firm, all performance reporting and disclosures must reflect only those assets within the boundary, providing consistency and comparability across the firm’s compliant presentations.

Partial compliance isn’t permitted because a firm must meet the applicable GIPS requirements in full to claim GIPS compliance. Disclosures are provided as part of the compliant presentation to prospective clients, not automatically to every potential client. And a firm shouldn’t restrict its compliant presentation to only a subset of clients; the disclosure framework is intended to be available to prospective clients within the defined process.