Explanation:

• Option A is incorrect because a claim of compliance under GIPS requires the inclusion of all fee-paying discretionary accounts in at least one composite, not all accounts (which may include non-discretionary accounts).

• Option B is correct. The GIPS standards mandate the use of composites to aggregate portfolios with similar investment mandates, objectives, or strategies. This requirement ensures transparency and prevents firms from cherry-picking high-performing accounts to misrepresent the performance of an investment strategy.

• Option C is incorrect because a composite must include all actual, fee-paying, discretionary portfolios managed under the same investment mandate, objective, or strategy. Non-discretionary accounts are excluded from this requirement.

Key Takeaway: Composites serve as a tool for fair and transparent performance reporting, ensuring consistency and preventing misleading representations of investment performance.