Compliance Status under GIPS

Hard Global Investment Performance Standards Compliance

In the context of the Global Investment Performance Standards (GIPS), compliance with the standards is critical for investment firms to demonstrate their commitment to transparency and fairness in reporting performance. A firm, XYZ Asset Management, claims compliance with GIPS after implementing internal controls and guidelines to ensure accurate performance measurement and reporting. However, during an annual review, it was discovered that XYZ Asset Management had not fully disclosed a material change in their performance calculation methodology that significantly impacted the reported returns.

Given this scenario, which of the following statements best describes the compliance status of XYZ Asset Management with GIPS?

XYZ Asset Management is compliant with GIPS because they conducted an internal review and have guidelines for performance reporting.

XYZ Asset Management is non-compliant with GIPS because failure to disclose material changes in performance calculation methodology violates the standards.

XYZ Asset Management's compliance with GIPS can be justified, as internal controls are sufficient even with undisclosed changes.

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