GIPS and conflict with law

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kschloss

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If Gips conflicts with law, you have to abide by the law and make full disclosure of the conflict (with gips) - got it. Question is, when this happens, are you still on compliance with GIPS??
 
Depending on the conflict, you can still claim compliance. Important is that you disclose the conflict.
If, however, the regulation is “weaker” than the standard, you should follow GIPS. Crucial is to define whether it is a conflict or just the government does not provide sufficient regulation on the matter.
 
You must abide by the law when it conflicts with GIPS - even if it is weaker. In this case, after obviously disclosing the conflict, are you still in compliance with GIPs or not??
 
If the law is weaker, then by definition you comply with the law if you comply with GIPS. There is no conflict to disclose.
 
Can’t GIPS conflict with the law, and the law be weaker? Due to conflict, if you abide by GIPS you are breaking the law, so you cannot simply do this - you must abide by the law and disclose…BUT are you still GIPS compliant??
 
Weaker does not simply mean different. Weaker means “requires less rigor” - maybe less disclosures, looser standard of calculation, what have you.
Sorry, not trying to dance around the crux of the matter, which is: what if the law IS, in fact, different (or stronger)? You have to follow the law, disclose the difference, but I don’t recall if you can still claim GIPS compliance.
 
I believe that the situation to which the OP referred is something like this: local law requires you to annualize returns on portfolios that have existed for less than one year, whereas GIPS prohibits annualizing returns on portfolios that have existed for less than a year.
It’s not a question about more restrictive or less restrictive; it’s a question about conflict.
 
haha to naren’s question and yes magician this is my quesiton - in this situation are you in compliance with this after you disclose?
 
GIPS country versions try to resolve the conflict . Otherwise investment companies would not use them . They have to stay within the law or get shut down eventually .
 
Magician are u sure this is right? For the code of ethics - u mist abide by the code - which means u must abide by CFA standards or local law - whichever is more strict - but here too what if local law conflicts with CFA standards (and is weaker)? U must always comply with the law - so in this example - just because u complied with the law, does that mean you are not in compliance with the code of ethics? I wouldn’t think so, so why would GIPS be any different?
 
kschloss wrote:Magician are u sure this is right?
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No. That’s why I said, “I believe.” But my position is reasonable. Suppose that the local law said that you weren’t allowed to follow any of the provisions of GIPS: they’re all illegal. If you comply with the law, can you claim GIPS compliance?
If I were you, I’d e-mail CFA Institute and ask them. They will answer you.
 
kschloss wrote:Magician are u sure this is right? For the code of ethics - u mist abide by the code - which means u must abide by CFA standards or local law - whichever is more strict - but here too what if local law conflicts with CFA standards (and is weaker)? U must always comply with the law - so in this example - just because u complied with the law, does that mean you are not in compliance with the code of ethics? I wouldn’t think so, so why would GIPS be any different?
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If the local law is weaker (e.g. allows you to allocate IPO shares to your personal account before clients’) then you must comply with the code of ethics, not with the local law.
If you comply with the law and if that violates the code of ethics then you must disclose the conflict.
I still don’t know if doing so would make you complient with the code of ethics. I’d think Not.
 
naren_ wrote:
kschloss wrote:Magician are u sure this is right? For the code of ethics - u mist abide by the code - which means u must abide by CFA standards or local law - whichever is more strict - but here too what if local law conflicts with CFA standards (and is weaker)? U must always comply with the law - so in this example - just because u complied with the law, does that mean you are not in compliance with the code of ethics? I wouldn’t think so, so why would GIPS be any different?
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If the local law is weaker (e.g. allows you to allocate IPO shares to your personal account before clients’) then you must comply with the code of ethics, not with the local law.
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Once again, this isn’t the issue; nobody’s disputing this.
naren_ wrote:If you comply with the law and if that violates the code of ethics then you must disclose the conflict.
I still don’t know if doing so would make you complient with the code of ethics. I’d think Not.
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This is the issue. I agree: if you don’t comply with GIPS, then you cannot claim compliance.
 
All - I wrote the CFAI - I will let you know
Naren to reiterate what Magician said directly above - do not confuse two different things - You must abide by the more strict requirement (Code of Ethics or the law) - but I am referring to a special case in which there is a conflict - if the code or GIPS is more strict than the law, and there is no conflictt, then its no problem to abide by GIPS or the code because there is no conflict (its just something above and beyond the law)
 
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