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. 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.
  3. Managing Wealth

    Asset Manager Ethics: Disclosures

    Effective communication and disclosures go a long way towards easing minds and creating a lasting and trusting symbiotic relationship. Here are the four steps to making good disclosures.
  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. Financial Advisor

    The Gatekeepers: Consultants Hold The Key

    Institutional investment consultants help match up asset managers with large institutions.
  6. 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?
  7. Financial Advisor

    Asset Manager Ethics: Risk Management and Compliance

    Managers should create a compliance and risk function that is integral to the investment function in order to plan for the increasingly more common market dislocations that occur in the global ...
  8. 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.
  9. Financial Advisor

    How Advisors Can Create Compliance Programs

    Here's how investment advisers can set up a compliance program that adheres to SEC requirements.
  10. Personal Finance

    Portfolio Manager: Job Description & Average Salary

    Discover the duties and responsibilities of a portfolio manager, along with education, training and skills requirements, and salary expectations.
Frequently Asked Questions
  1. What are the primary differences between a closed end investment and an open end investment?

    Learn what the primary differences are between open-end investments and closed-end investments, and the implications for ...
  2. Why is Ireland sometimes referred to as a tax haven?

    Learn why Ireland is a desirable location for corporations, how low the country's tax rate is and what taxation and economic ...
  3. What is the history of binary options?

    Discover the history of binary options trading, which is now one of the fastest growing investment market vehicles available ...
  4. How did Richard Branson make his fortune?

    Learn how Virgin Group tycoon Richard Branson earned his billions. Follow his journey from Virgin Records to the corporate ...
Trading Center