Just finishing the tedious reding on GIPS and it got me wondering whether a firm that fails independent verification (for obvious reasons) will still be able to claim compliance with GIPS. As I see it, if the compliance could not be verified thare is no compliance. The books do not say anything about this. These are the things that keep my mind busy on a lonely Sunday studying.
no i guess verification is a one up on compliance which gives a higher trust and credential for performance presentation. a firm can be gips complaint but may or may not be verified.
Verifying your firm’s compliance to GIPS, is a recommendation of GIPS.
“a firm that fails independent verification (for obvious reasons) will still be able to claim compliance with GIPS” I believe the verifying firm would provide them with a list of why they did not comply and were not verified, then they get a chance to fix the stuff and try again no?
I dont’t think I made it clear what my question was. Let me use the following metaphor: If you consider yourself healthy but go to the doctor for your annual physcial and fail this, would you still be able to say you are healthy? I don’t see logic in a firm failing verification to still be able to claim compliance. Any suggestions?
i think it would be unethical since you claim GIPS compliance knowing you are not compliant. Don’t think its something they’d test.
You can still claim compliance. You can say the claim was verified by so-and-so, and the verification report is available upon request. It is up to the investor to go thru the report and see you are not compliant at all. Caveat emptor.
but the claim of compliance in this case wasn’t verified. this seems like a scenario that when verification is sought it should be binding.
I don’t think this is correct Jan, i don’t have the text in front of me but i’m pretty sure i remember thinking to myself “man, there is no real upside to doing this” … because it seemed like if you fail verification you can’t claim compliance till remedied, so why would anyone do it?
You are right , it would be simpler to just not claim compliance , get things fixed , then try for compliance
Well now there are two ways to claim compliance. If you are not verified, you still have to state that you are NOT independently verified. I think that’s something new as I don’t remember it from before.
I don’t think thats right either… i don’t remember you having to say anything if you aren’t verified and haven’t sought to be. It’s not mandatory anyhow.
I couldn’t find it in the CFAI text because its too dense and hard to read, but from the 2011 Stalla Guide, page 18-18 it reads: “For firms not verified, the disclosure must read: ‘[Name of firm] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Name of firm] has not been independently verified.’” Schweser 2011 says the same thing on Page 199 of Volume 5. I looked at my Schweser book from last year and it didn’t have this. So it looks like new stuff.
Its true, you have to disclose it if you haven’t been verified. CFAI volume 6, page 308
For FIRMS that are verified: “[Insert name of FIRM] claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. [Insert name of FIRM] has been independently verified for the periods [insert dates]. The verification report(s) is/are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.” ------------------------ Please compare it with programmer’s post for case of not-verified. It seems it asks more if the firm is verified.