GIPS® Standards Do’s & Don’ts

GIPS® Standards Do’s and Don’ts

First Quarter 2019 is almost half over.  Now is a great time for an in-depth review and refresh of firm-wide GIPS standards policies and procedures, especially for firms on an annual verification cycle.

Here’s a list of Do’s and Don’ts to help with those P&P reviews and final polishing of GIPS Composite Reports.

DO                                             DON’T

DO provide a compliant presentation to all prospective clients prior to or along with any other performance related inform
Add desktop procedures to effectively support this policy?
DON’T include inappropriate claims of GIPS verification/compliance.
Add as a compliance annual training point for your marketing team?
DO consider Consultant databases/RFPs as a prospective client and provide a compliant presentation. DON’T reference performance as GIPS compliant; the claim of compliance applies to the firm.
DO confirm all required disclosures are included in compliant presentations. DON’T use the term audited performance when referring to a firm-wide verification.
DO update the “verification through” date on the firm’s compliant presentations and policy & procedure document after each verification opinion is issued. DON’T present partial period performance for new/closed composites without also disclosing the period it represents.
DO disclose all material events/changes to the firm and composites. Consider/discuss with PMs any disclosure that might need to be added due to significant events? DON’T link performance periods that have a gap between them.
Are visual separations of different periods effective/not misleading?
DO link performance from a prior firm if it meets ALL portability requirements. DON’T link performance from a prior firm unless it meets ALL portability requirements.
DO clearly label model/representative account data as “supplemental” if it’s on the compliant presentation. DON’T link hypothetical and actual performance.
DO disclose the most appropriate fee schedule for prospective clients. Agree to ADV to capture any updates? DON’T use model fees that could result in composite net performance that is better than actual net of fee performance.
DO apply a consistent policy for the inclusion/exclusion of new/closed accounts in firm and composite year-end assets. Do GIPS standards firm AUM and ADV AUM reconcile? DON’T change the benchmark presented without including required disclosures.
DO keep a record of prospective clients who have received compliant presentations, to: Confirm provision at least annually, andAppropriately limit redistribution in the event of a material error. DON’T disregard local laws or regulations; they must be followed in addition to the GIPS standards requirements.

Questions/Comments? Contact Us: 503-887-5842

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Cascade Compliance was established with a 100% dedication to consultation and verification services for the investment industry.  With that focus comes thought leadership and a commitment to keeping clients informed about operational and compliance developments and upcoming changes from the CFA Institute.

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