Ethics and Standards - GIPS: Key Characteristics

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. Career Education & Resources

    How Hard are the CFA Exams?

    Learn about the difficulty of the CFA exams with a description of the tests, some statistics on pass rates and suggestions that can help you pass the exams.
  2. Professionals

    What it Takes to be a Financial Analyst

    A financial analyst researches companies and economic conditions to make business, sector and industry recommendations.
  3. Career Education & Resources

    Financial Analyst: Career Path & Qualifications

    Read about what it takes to become a financial analyst in a corporation or securities firm, and learn how far you can rise in the profession.
  4. Career Education & Resources

    Financial Planner: Career Path & Qualifications

    Learn what education and certifications you need to become a financial planner, as well as the future prospects and earnings potential for financial planners.
  5. Career Education & Resources

    Where to Find Non-Profit Finance Jobs

    The non-profit sector offers a stable selection of jobs for those who seek other types of fulfillment from their jobs than just purely financial.
  6. Career Education & Resources

    Portfolio Manager: Career Path & Qualifications

    Learn about the basic requirements for getting hired as a portfolio manager, and discover how most professionals in the field rise into the position.
  7. Your Practice

    4 Professional Associations Advisors Should Join

    These four professional organizations are among the most respected and well known in the industry.
  8. Professionals

    Equity Research: Career Path and Qualifications

    Find out what equity research analysts do on a day-to-day basis, and learn more about the typical career progression for these securities professionals.
  9. Professionals

    What's on the CFA Level II Exam?

    The Chartered Financial Analyst Level II exam is the second of three tests that CFA candidates must pass.
  10. Professionals

    Financial Data Analyst: Career Path & Qualifications

    Learn more about the career options available to financial data analysts, and determine whether the profession is a good match for you.
RELATED TERMS
  1. Personal Financial Advisor

    Professionals who help individuals manage their finances by providing ...
  2. CFA Institute

    Formerly known as the Association for Investment Management and ...
  3. Security Analyst

    A financial professional who studies various industries and companies, ...
  4. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly ...
RELATED FAQS
  1. What are the differences between a Chartered Financial Analyst (CFA) and a Certified ...

    The differences between a Chartered Financial Analyst (CFA) and a Certified Financial Planner (CFP) are many, but comes down ... Read Full Answer >>
  2. How do I become a Chartered Financial Analyst (CFA)?

    According to the CFA Institute, a person who holds a CFA charter is not a chartered financial analyst. The CFA Institute ... Read Full Answer >>
  3. What types of positions might a Chartered Financial Analyst (CFA) hold?

    The types of positions that a Chartered Financial Analyst (CFA) is likely to hold include any position that deals with large ... Read Full Answer >>
  4. Who benefits the most from prepaid expenses?

    Prepaid expenses benefit both businesses and individuals. Prepaid expenses are the types of expenses that are bought or paid ... Read Full Answer >>
  5. If I am looking to get an Investment Banking job. What education do employers prefer? ...

    If you are looking specifically for an investment banking position, an MBA may be marginally preferable over the CFA. The ... Read Full Answer >>
  6. Can I still pass the CFA Level I if I do poorly in the ethics section?

    You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center