2019 CFA level 3 qbank reading 37 overview of the global investment performance standards questions

Question #3 of 103 If DeLecrette Investment Management wishes to claim compliance with the Global Investment Performance Standards GIPS® for their annual nancial report, the report must

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Question #1 of 103

Handley Asset Management (HAM), an investment management rm founded in 2000,

manages wrap and other non-wrap accounts HAM is preparing a wrap fee presentation for its

small-cap value composite The performance results in the presentation date back to 2002;

however, the rm began including wrap fee portfolios in the composite in 2006 Which of the

following statements is most accurate?

A) To be compliant with GIPS, HAM must disclose each period when an actual wrap fee

portfolio was not in the composite being identi ed

B) To be compliant with GIPS, HAM must exclude the wrap fee portfolios from its

presentation results

C) HAM’s presentation is compliant with GIPS as is and no change or disclosure is required.

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In October of 1998, Alice Freeman, Georgeanne Pallence, and Mark Antonasanti formed FPA

Investment Management (FPA) All three of these individuals have enjoyed considerable success

in their careers Freeman is highly regarded for her expertise in the area of security analysis,

while Pallence and Antonasanti are well known for their exemplary management of

xed-income and equity portfolios, respectively

In the initial period after its inception, FPA only accepted high net worth clients, requiring a

minimum investment of $5 million In early 2000, however, FPA made the decision to expand its

client base by lowering its minimum investment requirement to $2 million In the e ort to

attract new clients and improve the information it provided for its current clients, FPA prepared

and distributed performance presentations that re ected the results of its three primary

investment styles That is, FPA presented performance results for an intermediate xed-income

composite, a broad equity composite, and a balanced composite The following list describes

some of the actions that FPA took when preparing its performance presentations

Action Number Description

1

All composites included only assets under management and were not linked with simulated or model portfolio

performance.

2 Accrual accounting and book values were used to compute xed-income returns.

3 Trading expenses were deducted prior to calculating returns.

4 Fee schedules were included in the presentations.

5 All actual fee-paying discretionary accounts were included in at least one of the three composites.

6 Asset-weighted composite returns were calculated using end- of-period weightings.

7

The performance of the equity portion of the balanced accounts, excluding cash, was combined with the equity composite results.

8 The S&P 500 index was used as the benchmark for all three

composite performance presentations.

9 Equal-weighted rates of return that adjust for cash ows were

used.

Which of FPA's actions indicated below are NOT in compliance with the Global Investment

Performance Standards (GIPS)?

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A) Actions 2 and 7.

B) Actions 3 and 6.

C) Actions 1 and 5.

If DeLecrette Investment Management wishes to claim compliance with the Global Investment

Performance Standards (GIPS®) for their annual nancial report, the report must include which

of the following statements?

A) DeLecrette Investment Management claims compliance with the Global Investment

Performance Standards (GIPS®) and has prepared and presented this report in

B) DeLecrette Investment Management has prepared and presented this report in

compliance with the Global Investment Performance Standards (GIPS®)

C) DeLecrette Investment Management has prepared and presented this report in

compliance with the Global Investment Performance Standards of the CFA Institute (CFA

Which of the following statements most accurately describes why the Global Investment

Performance Standards (GIPS) were created? To:

A) meet the need for a single globally accepted set of investment performance

presentation standards

B) provide comparability of performance results among nations for which no presentation

guidelines currently exist

C) meet the need for a single globally accepted set of regulatory guidelines among

developed securities markets

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Jonathan Goolsby, a performance-reporting analyst at Handley Asset Management (HAM), is

preparing after-tax returns for inclusion in a performance presentation and needs to determine

the most appropriate method to incorporate the e ects of taxes on returns HAM employs

tax-aware portfolio management strategies If Goolsby uses the mark-to-liquidation method when

computing after-tax returns, the most likely e ect is that returns will be:

A) correctly stated.

B) understated.

C) overstated.

Which of the following ratios is least likely to be shown in a performance presentation under

the GIPS provisions for private equity?

A) Total value to residual value.

B) Paid-in capital to committed capital.

C) Cumulative distribution to paid-in capital.

Which of the following is NOT a composite construction requirement under the Global

Investment Performance Standards (GIPS)?

A) Firm composites must be de ned according to similar investment objectives and/or

strategies

B) Carve-out returns excluding cash cannot be used to create a stand-alone composite.

C) Firms must disclose the use of simulated or model portfolio results.

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Firm X currently claims compliance with the Global Investment Performance Standards (GIPS)

but uses settlement-date accounting Beginning January 1, 2005, what must Firm X do to remain

compliant?

A) Nothing, there is no change in requirements.

B) Begin using trade-date accounting and recalculate historical performance of its

composites

C) Begin using trade-date accounting.

Which of the following best describes the underlying principles upon which the Global

Investment Performance Standards (GIPS) are based?

A) Uniformity and consistent application of standards for the global regulation of the

securities industry

B) Fair and consistent application of a global set of regulatory requirements.

C) Full disclosure and fair representation of performance results.

Which of the following lines of argument has/have been put forth to justify the establishment of

the Global Investment Performance Standards (GIPS)?

A) All of these choices are correct.

B) To enhance consistency in the use of the standards.

C) To increase the con dence that prospective and existing clients have in the industry.

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In October of 2008, Alice Freeman, Georgeanne Pallence, and Mark Antonasanti formed FPA

Investment Management (FPA) All three of these individuals have enjoyed considerable success

in their careers Freeman is highly regarded for her expertise in the area of security analysis,

while Pallence and Antonasanti are well known for their exemplary management of

xed-income and equity portfolios, respectively

In the initial period after its inception, FPA only accepted high net worth clients, requiring a

minimum investment of $5 million In early 2010, however, FPA made the decision to expand its

client base by lowering its minimum investment requirement to $2 million In the e ort to

attract new clients and improve the information it provided for its current clients, FPA prepared

and distributed performance presentations that re ected the results of its three primary

investment styles That is, FPA presented performance results for an intermediate xed-income

composite, a broad equity composite, and a balanced composite The following list describes

some of the actions that FPA took when preparing its performance presentations

Action Number Description

1

All composites included only assets under management and were not linked with simulated or model portfolio

performance.

2 Accrual accounting and book values were used to compute xed-income returns.

3 Trading expenses were deducted prior to calculating returns.

4 Fee schedules were included in the presentations.

5 All actual fee-paying accounts were included in at least one of the three composites.

6 Asset-weighted composite returns were calculated using end- of-period weightings.

7

The performance of the equity portion of the balanced accounts, excluding cash, was combined with the equity composite results.

8 The S&P 500 index was used as the benchmark for all three

composite performance presentations.

9 Equal-weighted rates of return that adjust for cash ows were

used.

Which of FPA's actions indicated below are NOT in compliance with the Global Investment

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A) Actions 6, 8, and 9.

B) Actions 1, 6, and 8.

C) Actions 2, 3, and 4.

Which of the following regarding the GIPS real estate valuation principles is most accurate?

A) The GIPS recommend that real estate investments be valued externally by outside

sources

B) Fees paid to external valuators must not be based on resulting value.

C) The GIPS require the reporting of a single appraisal value.

Which of the following is NOT an important characteristic of how a rm de nes itself? The rm

de nition establishes the:

A) set of portfolios that must be included in at least one of a rm's composites.

B) entity to which the GIPS standards apply when a claim of compliance is made.

C) entity to which local securities laws apply when they exceed the GIPS requirements.

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The Alexo Investment Management Group manages the investments for 30 retail clients Alexo

has full discretion over the investments of these clients' assets At the close of each day, the

excess cash in the clients' portfolios is swept into a money market fund Alexo does not manage

the money market fund, so it does not include the cash portion of the portfolio in its total

return performance calculations Alexo discloses its treatment of cash and cash equivalents in

its performance presentation

Which of the following statements regarding Alexo's compliance with the Global Investment

Performance Standards (GIPS) is CORRECT? Alexo is:

A) in compliance with the GIPS standards The Standards do not require excess cash to be

included in total return performance calculations unless the composite consists

B) not in compliance with the GIPS standards The Standards require cash to be included

in total returns calculations if the portfolio manager has control over the amount of the

C) in compliance with the GIPS standards The Standards do not require cash or cash

equivalents to be included in total return performance calculations unless the portfolio

White and White Associates (WWA) is a money management rm that is planning to advertise

that it is GIPS compliant In the advertisement, WWA may include performance results:

A) only if WWA includes further information including the return of the composite's

benchmark

B) only if there has been third-party veri cation.

C) and does not have to include any additional information concerning performance.

As part of the veri cation process of a rm claiming GIPS compliance, the third party doing the

veri cation asks for a list and description of the rm's composites and a list of all portfolios

under the rm's management Which of these requests is (are) actually part of the preparation

process?

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A) A list and description of composites but not a list of all portfolios under management.

B) Both asking for a list and description of composites and a list of all portfolios under

management

C) A list of all portfolios under management but not a list and description of composites.

Mesa Asset Management has claimed compliance with the Global Investment Performance

Standards (GIPS®) for many years and it is now January 1, 2011 Robert Flay, managing director

for Mesa wants to go beyond merely complying with the standards and wants to incorporate all

of the GIPS recommendations, particularly those dealing with presentation and reporting Flay

asks two of his performance analysts, Catherine Cora and Luigi Batali for suggestions as to how

Mesa can incorporate the recommendations

Cora:

"Mesa is permitted to link our noncompliant annual performance data from 1996-1999 to our GIPS compliant data, as long as we meet the disclosure requirements GIPS reporting recommendations suggest that we eliminate all non-compliant data after presenting the required 5 years of compliant historical performance."

Batali:

"Including a measure of the standard deviation of composite returns

is extra information that will provide prospective clients with information regarding the uctuation of composite returns over time."

After listening to their statements, Flay should:

A) agree with Cora, but disagree with Batali.

B) disagree with both Cora and Batali.

C) disagree with Cora, but agree with Batali.

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Teaton Investment Management (TIM) has recently developed a proprietary prediction model.

To test the model, TIM created a returns history for an equity value portfolio using hypothetical

assets and a back-tested asset allocation strategy TIM intends to include the simulated

portfolio results in its performance presentation Which of the following most accurately

describes TIM's compliance with the Global Investment Performance Standards (GIPS)? (Assume

that TIM is GIPS-compliant in all other areas) TIM is:

A) GIPS-compliant as long as it discloses the inclusion of simulated returns in its

performance presentation

B) GIPS-compliant if it includes the simulated portfolio in a composite that consists solely

of simulated portfolios

C) not GIPS-compliant because the standards do not permit the inclusion of simulated

portfolio results in performance presentations

B) Strategies should avoid having too many quali ers to prevent the manager from having

a large number of small composites

C) Strategies should be as fully de ned as possible so that portfolios within the composites

closely match each other

As countries adopt the Global Investment Performance Standards (GIPS), which of the following

is least likely to occur?

A) Existing and potential clients will be able to make fair and unambiguous comparisons

among investment rms

B) Competition in the global investment industry will be enhanced.

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C) The trend toward cross border investments will decline.

Which of the following investments is most likely to be covered by the real estate provisions of

the GIPS?

A) A commercial mortgage-backed security on a new o ce block.

B) A real estate investment trust.

C) A commingled investment in a group of residential properties.

The purpose of third-party veri cation:

A) is required by CFA Institute and the Securities and Exchange Commission (SEC).

B) may give a GIPS compliant rm a competitive advantage by making the claim to GIPS

compliance more credible

C) is required by CFA Institute but not the SEC.

All of the following are reasons why the Global Investment Performance Standards (GIPS) are

necessary EXCEPT enhancing:

A) market e ciency.

B) competition in global markets.

C) investor con dence.

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Assume that on October 20, 2005, Firm X, which is in compliance with the Global Investment

Performance Standards (GIPS), acquired the assets for Firm Z, which is not in compliance with

the GIPS standards Until what date may Firm X continue to claim compliance with the

Standards before it must have the assets of Firm Z GIPS compliant?

A) January 1, 2006.

B) January 1, 2007.

C) October 20, 2006.

Which of the following reasons is least likely to explain why a portfolio has been moved from

one composite to another?

A) The portfolio size has recently fallen below the minimum threshold speci ed for the

“Japanese Value Equities above ¥500 million” composite

B) The rm has rede ned the composite, and the portfolio no longer falls under the new

de nition

C) The portfolio size has grown above £5 million and is more suitable to the “UK Equities

above £5 million” composite than the “UK Equities below £5 million” composite

In the presentation of a private equity fund, a rm reports an annualized since-inception (SI)

internal rate of return (IRR) net-of-fees but not gross-of-fees The net-of-fees returns are not

net of carried interest With respect to GIPS, the rm has:

A) made an error by not netting out carried interest but not by omitting returns calculated

gross-of-fees

B) made an error by not reporting returns gross-of-fees but netting out carried interest is

not required so that is not an error

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C) made an error by not reporting returns gross-of-fees and by not netting out carried

interest

Bill Klecko, owner of the boutique money manager Klecko Investments, wants to claim GIPS

compliance He has hired Janice Walsh, a performance-presentation consultant, to make sure

Klecko Investments' performance presentation passes muster

As soon as Walsh arrives at the Klecko o ces, she is handed a sheet of paper showing the

rm's performance numbers Bill Klecko invites her to review the material at her own pace, talk

to anyone in the rm about the numbers, and prepare recommendations to improve the

presentation Before Walsh reads the document, Klecko tells her he is particularly concerned

about whether cash ows are properly accounted for She asks him how the rm accounts for

cash ows, and he tells her the following:

"We calculate returns adjusted for daily external cash ows, creating a time-weightedrate of return."

"Our returns estimate the e ects of cash ow as closely as possible, but do not exactly

re ect them."

"We adjust for dividend payments, but not interest income."

"We use the modi ed Dietz method for all portfolios initiated before January 2003 andthe modi ed IRR methods for all portfolios initiated in January 2003 or later

After hearing how the company calculates returns, Walsh asked for monthly data on one of the

portfolios to check the calculation Here is the data:

Date Market Value Cash Flow

Walsh then retires to a vacant o ce to check out the performance review

Klecko InvestmentsEquity Portfolios – Composite created Jan 1, 1999

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Fiscal Year Composite Return Number of Portfolios Total Assets at End of Year as % of Total Firm Composite Assets

Performance calculated net of fees

Portfolios in the composite are asset-weighted quarterly

Klecko's equity composite excludes the results of equity hedge-fund operations, whichare managed by a separate department using its own investment style Portfolios in thecomposite may use futures or options to hedge risk, but do not use leverage

Valuations of equity investments are calculated based on trade date starting in 2006

Portfolios not collecting fees are excluded from the portfolio

Composite includes equity portions of blended equity and xed-income portfolios,including asset-weighted cash positions

All numbers presented in U.S dollars

After reviewing the presentation, Walsh again meets with Bill Klecko She identi es several

violations of GIPS, including:

The lack of a notation that composite de nitions are available upon request

Inclusion in the equity composite of carve-outs that are not managed separately withtheir own cash balance

Failure to list the minimum asset value for portfolio inclusion in the composite

The lack of a fee schedule and disclosure of what fees are deducted

No disclosure of dispersion of portfolio returns relative to the composite

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A) include the hedge-fund division in the composites.

B) di erentiate the portfolio-management styles of the equity and hedge-fund managers.

C) do nothing The composite already satis es the GIPS requirements to be a rm.

Which of the following characteristics did Walsh misidentify as a GIPS violation in Klecko

Investments' performance presentation?

A) Inclusion in the equity composite of carve-outs that are not managed separately with

their own cash balance

B) Failure to list the minimum asset value for portfolio inclusion in the composite.

C) The lack of a fee schedule and disclosure of what fees are deducted.

Walsh forgot to point out the GIPS violation involving:

A) failure to disclose treatment of withholding tax on capital gains.

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B) frequency of portfolio asset-weighting.

C) lack of disclosure about scal year end.

Under the Global Investment Performance Standards (GIPS), for periods beginning January 1,

2001, portfolio valuation must be based on:

A) market values and they must occur at least quarterly.

B) market values and must occur at least monthly.

C) cost basis and they must occur at least monthly.

Which of the following lines of argument has/have been put forth to justify the establishment of

the Global Investment Performance Standards (GIPS)?

A) Enhancing competition in global markets.

B) Both of these statements are correct.

C) Enhancing the consistency in performance presentation for inter-country holdings.

Eric Jicu, a highly successful portfolio manager of the EJ Fund, wishes to de ne the EJ Fund as a

rm under the Global Investment Performance Standards (GIPS®) standards Jicu is employed

by National Investing Alliance (NIA), a small regional brokerage rm Although he has disclosed

this information to his superiors at NIA, he would like to disclose his compliance for marketing

purposes by using his past actual performance results of ve years, which included two years of

simulated results Jicu also managed several fee-paying portfolios that were

non-discretionary under a di erent investment style Since the results of these non-non-discretionary

portfolios were highly successful, he wanted to include them into his EJ Fund composites for

compliance In his statement of compliance, Jicu wrote: "The EJ Fund claims compliance with the

Global Investment Performance Standards (GIPS®) and has prepared and presented this report

in compliance with the GIPS standards The EJ Fund has not been independently veri ed."

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In de ning a rm, does the EJ Fund qualify as a rm under GIPS?

A) No, since to claim compliance NIA must be included.

B) Yes, since the EJ Fund is a separate entity it does qualify under GIPS.

C) No, since there is no mention that Jicu is incorporated he cannot qualify as a rm.

In constructing the historical results of the EJ Fund, is Jicu correct in his approach?

A) No, because simulated results cannot be included with actual performance results.

B) Yes, because he included ve years of actual performance data.

C) No, because GIPS requires a minimum of ten years of performance before claiming

compliance

In constructing the composites, is Jicu correct in his approach?

A) Yes, since fee-paying and non-fee-paying portfolios can be included in the same

composite as long as they have the same investment objectives

B) No, since fee-paying and non-fee-paying portfolios cannot be included in the same

portfolio

C) No, since the fee-paying discretionary portfolios are managed under a di erent

investment style as the non-fee-paying non-discretionary portfolios

In the compliance statement, is Jicu correct is claiming compliance?

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A) No, since Jicu is not in full compliance with GIPS.

B) No, since Jicu’s GIPS compliance statement is not written correctly.

C) Yes, since Jicu is in compliance with GIPS.

In January 2003, the Medusco Investment rm has decided to present its performance history

in compliance with the Global Investment Performance Standards (GIPS) Medusco was formed

on January 1, 1992, and has never before presented its performance results in compliance with

the GIPS standards Which of the following actions must Medusco take in order to claim GIPS

compliance?

A) Present GIPS-compliant performance results for the 5-year period from January 1, 1998,

through December 31, 2002, and report ve additional years of non-GIPS-compliant

B) Present GIPS-compliant performance results for the 5-year period from January 1, 1998,

through December 31, 2002

C) Retroactively comply with GIPS for periods after January 1, 2000, and report

non-GIPS-compliant performance results for the periods January 1, 1993, through December 31,

Which of the following is least likely a GIPS valuation requirement?

A) Firms must disclose if their valuation hierarchy di ers from the GIPS recommended

hierarchy

B) Firms must disclose their portfolio valuation policies and hierarchy.

C) If local laws or regulations related to valuation con ict with GIPS, rms are required to

follow the more strict of the law or standard

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Which of the following actions are recommended (not required) for claiming compliance with

the Global Investment Performance Standards?

A) Accrual accounting should be used for dividends (as of the ex-dividend date).

B) If a rm sets a minimum asset level for portfolios to be included in a composite, no

portfolios below that level can be included in the composite

C) Total return, including realized and unrealized gains plus income must be used.

McGregor Investment Management promotes itself as a xed-income investment management

rm The vast majority of the portfolios it manages are xed-income portfolios McGregor does,

however, manage a few portfolios, utilizing a growth equity investment strategy, but the rm

has no intention of ever promoting this strategy Under the Global Investment Performance

Standards (GIPS), must these portfolios be included in a composite?

A) No, because the rm does not normally manage portfolios to a growth equity strategy

and is not planning to promote it

B) Yes, because the portfolios are managed to a widely recognized investment strategy.

C) Yes, because the portfolios are discretionary and fee paying.

Stroud Investments is preparing a wrap fee presentation for a potential wrap fee client

According to the GIPS standards, the investment performance contained in the presentation

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For private equity, valuations must be prepared:

A) at least quarterly, but monthly valuations are recommended.

B) at least annually, but quarterly valuations are recommended.

C) annually only, and the lack of liquidity of private equity prohibits quarterly valuations.

Consider the total quarterly returns for the growth and income composite of Zest Investment

Management (ZIM): Q1 = 3.20%, Q2 = 4.25%, Q3 = 3.95%, Q4 = 3.35% What is the appropriate

total annual return under the calculation methodology under the Global Investment

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The calculation of capital return under the GIPS provisions for real estate is performed by

dividing a measure of return by capital employed Beginning with the change in value of the

real estate (and cash), how would the calculation of return account for capital expenditures,

nonrecoverable expenses, and sales proceeds?

Capital Expenditures Nonrecoverable

Expenses Sales Proceeds

B) a rm is required to present, at minimum, ten years of annual investment performance

that is compliant with GIPS

C) portfolios must be valued at least monthly for periods beginning January 1, 2001.

Graham and Crickenburg Associates is a large money-management company The rm has

been in existence for four years, and Graham and Crickenburg Associates has two divisions

which are separate legal entities One division in the company handles all the individual client

accounts and one division handles all the corporate accounts The co-owners and chief

executive o cers, Charles Graham and Kevin Crickenburg, are considering the advantages of

conforming to the Global Investment Standards, GIPS® Graham thinks that it may be more

cost e ective to only make the individual client division GIPS compliant Graham thinks this is

acceptable to only make one part of the rm GIPS compliant if they sign a letter of intent that

they will make the entire company GIPS compliant within a year Crickenburg says that it is not

possible, because the entire company must become GIPS compliant or not at all They resolve

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to investigate the issue later, and Graham and Crickenburg move on to examining the

requirements for input data and calculations

Graham and Crickenburg note that they have records concerning the returns of portfolios in

both divisions going back since the rm began The returns were calculated monthly, used

accrual accounting for xed-income assets, used accrual accounting for dividend-paying stocks,

and used settlement-date prices They have all the nal returns for the portfolios in hard copy

form Most of the raw data pertaining to the returns of the assets in the portfolios and

calculation methods have been lost This was because Graham and Crickenburg threw away the

hard copy of the raw data A computer virus destroyed many of the raw data les Graham and

Crickenburg discuss the adequacy of the data for GIPS compliance Graham says that only

having the returns data is su cient since the company had an external CPA go over the books

each year Crickenberg says that having records going back four years is su cient

Graham and Crickenburg Associates has a wide variety of individual clients Some of the clients

are very conservative, and some are very aggressive Two separate clients are so conservative

that, four years ago, they stipulated that their entire portfolio simply be invested equally across

US Treasury strips with two, four, six and eight years to maturity As each group matures, as the

rst set did two years ago, it would be rolled over into the eight years to maturity strips again

These clients put their money with Graham and Crickenburg Associates so that the company

would take care of the rollover, the paperwork, and computing the tax liability The clients pay a

fee for this service

The portfolios of the more aggressive clients were managed by Jill Laporte, CFA, for the rst two

years of the existence of Graham and Crickenburg Associates The portfolios she managed had

higher returns and lower standard deviations than their respective indexes for those rst two

years After two years, Laporte left the rm and took a small number of the clients with her

After she left, the aggressive portfolios that had been under her management and remained

with Graham and Crickenburg Associates underperformed their respective indexes

Graham and Crickenburg Associates is an American based rm with most of its clients living or

doing business in the United States Some of the clients are foreign, however, and have the

majority of their holdings in foreign assets Graham and Crickenburg have been computing the

returns of these portfolios in their respective domestic currencies The portfolios denominated

in foreign assets use foreign benchmarks, naturally, and some of the indexes used as

benchmarks report returns net of taxes Graham and Crickenburg discuss the extent of the

details they must report with respect to these facts Graham says that they must disclose the

currency used to express the performance of each portfolio Crickenburg says they do not have

to disclose details concerning indexes reporting returns net of taxes

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In Graham's and Crickenburg's discussion concerning whether to make only a portion of the

company GIPS compliant, they each gave an opinion concerning the possibility of making only

one division GIPS compliant and a reason supporting that opinion With respect to both the

opinion and reason:

A) both are incorrect.

B) only one is correct.

C) both are correct.

With respect to the historical input data, which of the following are impediments to Graham

and Crickenburg associates becoming GIPS compliant? The returns:

A) of the dividend-paying stocks are calculated using accrual accounting.

B) are calculated using settlement-day prices.

C) are calculated monthly and on the date of all large cash ows.

With respect to the historical input data, the existence of only the portfolio returns data, and

the fact that data only goes back four years: Graham and Crickenberg both state the data is

su cient Graham says only having the portfolio returns is su cient, and Crickenberg says only

having four years is su cient With respect to these statements:

A) both are incorrect.

B) only Graham is incorrect.

C) only Crickenberg is incorrect.

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