{"id":38821,"date":"2021-12-08T02:26:22","date_gmt":"2021-12-08T02:26:22","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=38821"},"modified":"2026-08-28T13:55:07","modified_gmt":"2026-08-28T13:55:07","slug":"fundamentals-of-compliance","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/ethical-and-professional-standards\/fundamentals-of-compliance\/","title":{"rendered":"Fundamentals of Compliance"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/KL_ToCtahKM\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The GIPS standards must be applied on a firm-wide basis. There are two important issues that must be considered by a firm when it complies with the GIPS standards:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Definition of the firm.<\/li>\n\n\n\n<li>Definition of discretionary.<\/li>\n<\/ol>\n\n\n\n<div style=\"margin: 18px 0;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\"\n     target=\"_blank\"\n     rel=\"noopener noreferrer\"\n     style=\"display: block; text-align: center; padding: 14px 18px; border: 2px solid #1a73e8; border-radius: 18px; color: #ffffff; font-weight: 600; font-size: 16px; text-decoration: none; background-color: #1a73e8;\">\n    Master compliance fundamentals with our Free Trial.\n  <\/a>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Definition of Firm under GIPS<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The GIPS standards state \u201cThe firm should adopt the broadest, most meaningful definition of the firm. The scope of this definition should include all geographical (country, regional, etc.) offices operating under the same brand name, regardless of the actual name of the individual investment management company.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This implies that:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Firms must be defined as an investment firm, subsidiary, or division held out to clients or prospective clients as a distinct business entity.<\/li>\n\n\n\n<li>Total firm assets must be the aggregate of the fair value of all discretionary and non-discretionary assets under management within the defined firm.<\/li>\n\n\n\n<li>Firms must include the performance of assets assigned to a sub-advisor in a composite, provided that the firm has discretion over the selection of the sub-advisor.<\/li>\n\n\n\n<li>Changes in a firm\u2019s organization are not sufficient grounds for alternation of historical composite results.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Definition of Discretionary under GIPS<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The GIPS standards state \u201cIf documented client-imposed restrictions interfere with the implementation of the intended strategy to the extent that the portfolio is no longer representative of the strategy, the firm may determine that the portfolio is non-discretionary.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Non-discretionary portfolios must not be included in a firm\u2019s composites.<\/p>\n\n\n\n<div style=\"text-align: center; margin: 30px 0;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\"\n     target=\"_blank\"\n     rel=\"noopener noreferrer\"\n     style=\"display: inline-flex; align-items: center; justify-content: center; padding: 12px 26px; border-radius: 9999px; background: #1e5bd8; color: #ffffff; font-weight: bold; text-decoration: none;\">\n    Start Free Trial \u2192\n  <\/a>\n  <p style=\"margin-top: 12px; font-size: 16px; line-height: 1.5;\">\n    Master CFA compliance fundamentals, regulatory requirements, ethical responsibilities, and professional standards with our CFA Level I study materials and practice tools.\n  <\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The GIPS standards must be applied on a firm-wide basis. There are two important issues that must be considered by a firm when it complies with the GIPS standards: Master compliance fundamentals with our Free Trial. Definition of Firm under&#8230;<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[],"class_list":["post-38821","post","type-post","status-publish","format-standard","hentry","category-ethical-and-professional-standards","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Fundamentals of Compliance | AnalystPrep CFA Level 1<\/title>\n<meta name=\"description\" content=\"Learn CFA compliance fundamentals, GIPS firm definitions, endorsement rules, and key concepts for CFA Level 1 practice questions.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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