1. The Firm Is Specified. In order to claim compliance with the GIPS standards, an investment management firm must define the precise entity that is claiming compliance. This definition may be the entire firm, or a subsidiary or division of a larger firm, so long as it is held out to clients and prospective clients as a distinct business entity.

In the context of the GIPS, a number of distinct business entities can be carved from the same corporation. To claim compliance, the distinct entity must:

a) be organizationally and functionally segregated from other business units and departments

b) retain discretion over the assets it manages, with autonomy in the decision-making process

c) have a distinct market or client type and/or use a certain investment process

2. Fair Representation and full disclosure are ensured.

3. All-Inclusive - Under the GIPS, firms are required to include all actual fee-paying, discretionary portfolios in at least one composite, defined according to a similar strategy and/or objective.

4. Minimum History - Firms are required to show a minimum five years of performance data, or show data since inception of the firm if the firm is younger.

5. Moving toward 10-Year Standard - Once five years of compliant data is achieved, a firm is required to add its annual performance for each of the next five years going forward, thus achieving a minimum 10-year track record.

6. Methodology/Disclosures - Specific requirements are made by the GIPS (depending on the type of manager and the assets being managed) with respect to calculation methodology, and the required disclosures it must make.

7. Integrity of Input Data - For example, composites and benchmarks must be ex ante (created before the fact), not ex post (created after the fact).

8. Required Provisions - Examples are those that must be adopted to client GIPS compliance and recommended provisions that ensure best practice. Over time, expect certain recommended elements to become required.

9. Additional/Supplemental Disclosures - These are often necessary, depending on the situation, in order to achieve the fair representation/full disclosure goals.

10. GIPS Updates, Guidance and Revised Requirements - These must be promptly adhered to, in order to claim compliance.

11. To Resolve Conflicts between local law and the GIPS, the presentation must adopt local law and must make disclosure of this fact.



GIPS: Disclosure And Scope

Related Articles
  1. Small Business

    A Guide To Global Investment Performance Standards

    Is your investment management firm GIPS compliant? Learn more here.
  2. Financial Advisor

    Is Your Investment Manager Skilled Or Lucky?

    Being familiar with composite presentations will help you better assess the quality of an investment manager's performance.
  3. Managing Wealth

    Asset Manager Ethics: Valuation Is A Tricky Business

    Asset managers must accurately represent all of a clients assets in the client portfolio. This can be tricky for unique and hard-to-value assets.
  4. Financial Advisor

    CIPM: The Key To A Niche Career In Finance

    The prestigious CIPM designation can give you an edge in the finance world. Here's what you need in order to get it.
  5. Personal Finance

    Get A Job In Compliance

    If you're a stickler for rules, this could be a promising career path for you.
  6. Financial Advisor

    The Gatekeepers: Consultants Hold The Key

    Institutional investment consultants help match up asset managers with large institutions.
  7. Investing

    What Would Full Disclosure Mean For The Market?

    In the wake accounting scandals, more people are calling for full disclosure. But what would that even help?
  8. Financial Advisor

    Retirement Plan Advisors: Here's What the SEC Expects

    Here's what the SEC looks for when advisors align clients' suitability with investments.
  9. Small Business

    Want To Know What Disclosures Mean ... In Plain English?

    Disclosures are the fine print in financial reports. We strip away the legal speak to tell you what they really mean.
  10. Personal Finance

    Compliance Officer: Job Description and Average Salary

    Learn what being a compliance officer entails, including job description, required education and training, skills and national average salary.
Frequently Asked Questions
  1. Can I fund a Traditional IRA, a 403(b) or a Roth IRA using pension money?

    Can pension money be used to fund other retirement accounts?
  2. What are unregistered securities or stocks?

    Before securities, like stocks, bonds and notes, can be offered for sale to the public, they first must be registered with ...
  3. How does a company move from an OTC market to a major exchange?

    The over-the-counter market is not an actual exchange like the NYSE or Nasdaq. Instead, it is a network of companies that ...
  4. Can I roll a traditional IRA into a 529 college account for my grandchild?

    The short answer: Not without paying taxes. But as with much of the tax code, there are various nuisances and exemptions ...
Trading Center