CFA Level 1

Ethics and Standards - GIPS: Disclosure And Scope

Disclosure
In cases where local rules and regulations differ with the GIPS:

1.
firms are strongly encouraged to comply with GIPS standards in addition to any local standards;

2. firms must disclose all conflicts between GIPS and local, in its notes accompanying the performance summary;

3. complying with local standards does not necessarily mean that a firm has complied with GIPS.

Definition of the Firm
A firm is defined as an entity specified by criteria that segregates it from other business units, divisions, departments or offices. Possible criteria can include:

1. Is it a legal entity?

2. Does it market its services to a specific market (e.g. institutional, retail)?

3. Is the investment process distinct from other entities within the same larger corporate structure?

4. Does it have full discretion over assets - i.e. does it retain autonomy, or does it administer the discretion of others?

Historical Performance
  • The required minimum is either (a) five years or (b) since the inception of the firm, for a firm that has been in existence less than five years.


  • Once a firm has achieved five years of compliant history, it must add an additional year of performance every year until it reaches 10 years, so that after five years of claiming compliance, it will have a 10-year record.


  • Non-compliant performance records, for periods prior to Jan 1, 2000, may be linked to the compliant history - provided the firm discloses the presence of a non-compliant record and clearly explains why it is not in compliance.


  • A previous claim of compliance with an endorsed CVG (country-specific version of the GIPS, such as CFA Institute-PPS) is granted a reciprocal claim to GIPS compliance for all periods prior to Jan 1, 2006.
Compliance
  • Effective date for the revised GIPS standards is Jan 1, 2006, and all periods following that date are required to be in compliance with the revised standards. Periods prior to Jan 1, 2006, are encouraged to be in compliance.
    • All requirements set forth in the revised GIPS must be met immediately to claim compliance, with the following exceptions where effective dates are delayed (the practice is recommended, until the effective date when it is required):
      Description
      Frequency

      Effective date

      Real estate valuation

      Every quarter

      January 1, 2008

      Valuation of accounts with large external cash flows

      When received

      January 1, 2010

      Valuation of all accounts

      Every month end

      January 1, 2010

      Asset-weighted composite returns

      Every month end

      January 1, 2010

      Carve-out returns included in single asset class returns

      Discontinued

      January 1, 2010






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