GIPS® Error Correction Basics

Einstein said to make mistakes, because that’s how we learn and grow.  And we all make them.  That’s why the GIPS Standards include error correction requirements to provide transparency in reporting after a material error has been made. Below are our answers to error correction questions from attendees at this past year’s GIPS Conference.

What constitutes a material error versus a non-material error?

This is a common question, and the answer is dependent on the firm. Each firm has the ability to define materiality as they wish. The most important question that the firm needs to ask themselves is: would this error affect a prospects decision on investing with us or not? Most firms have three levels of materiality explicitly defined in their GIPS Policy Manual.

  1. The first is correction with no disclosure or redistribution. This is for minor errors, such as an understatement of composite annual performance by 50 basis points. It is unlikely that a prospect would choose not to invest with a firm due to a minor understatement in performance.
    • Example: composite annual performance understated as 14.75% instead of 15.20%
  2. The next level is correction with disclosure but no redistribution. This comes into play when the error is significant but would probably not change a prospect’s decision.
    • Example: composite performance is overstated as 15.75% instead 15.20%
    • The absolute change is 50bp, but the relative change is only 2.25%
  3. Level 3 or material errors will require disclosure and redistribution. The firm must redistribute a corrected GIPS Report to all parties who received the erroneous report, including current and prior verifiers. This level is reserved for errors that would likely impact a prospect’s decision to invest with the firm. Such errors usually have both a relative and absolute change associated with them.
    • Example: composite performance is accidentally presented as 5.20% instead of -5.20%
    • This is a significant change both in absolute and relative terms. As such, the GIPS Report would need to be corrected with disclosure of the error and redistributed to the parties mentioned above.

What documentation is recommended to keep as backup for an error?

A firm should keep an internal error correction log in the case of any error in a GIPS Report that has been distributed to a prospective client or investor, whether material or non-material. The type of error should be noted along with the affected GIPS Report(s) and materiality of the error.

It is a new requirement in 2020 for a firm to be able to demonstrate that they have made every reasonable effort to provide prospects GIPS Reports. This goes hand in hand with error correction, because a firm needs to know which parties to redistribute a corrected report to.

If you would like a sample error correction matrix, error correction log, or GIPS Report distribution tracking list, please email us at

If we find an error after the verification is done, how does this affect the verification?

An error should be treated the same regardless of when it occurred. It will not affect the firm’s ability to be verified or past verifications that had been completed prior to discovery of the error.  The firm must provide the updated report to the verifier and if material, to any past verification firms used if the error impacted the examination period of the prior verifier.

If your firm is going through pre-verification consulting and discovers an error in the process, they do not have to disclose the error on the GIPS Report, regardless of materiality. This is because the firm had not yet claimed GIPS Compliance, and as a result, does not have GIPS Reports. Remember that the GIPS error correction policies apply only to the GIPS Reports, and not information presented elsewhere.

Just to be clear, the error correction policy will only apply to the GIPS report provided and not marketing material? For example, if marketing material pages in a one on one presentation is incorrect but GIPS disclosures are correct, is there any obligation to apply the error correction policy?

Error correction only applies to the GIPS Report.  CFA Institute just issued a new Q&A on this and specifically noted that the prior guidance to consider other marketing materials is no longer needed.

A sample error correction policy for firms can be found here.