Thanks in advance. If the firm is denied verification by the verifier, can they still claim GIPS compliance, or are they just not allowed to state that the firm is verified?
Thanks again.
Good question. I have a similar question: If the verifier concludes that the firm is not in compliance with GIPS standards, can the firm still claim GIPS compliant and states that it has not been verifed(unethical)?
It seems that the firm does not have to disclose if the verification fails and why it fails.
I think this goes beyond the level of what we’ll be asked on the exam. If this happens, one of two things will take place:
a) the firm will modify their internal processes so they can be verified
b) the firm won’t care - which turns into a very fundamental debate with no clear answer. I’d say they technically can still claim GIPS compliance.
Realistically, I’d guess 99% of firms will go with option a as their clients/prospective clients want to see verification and it will be much harder to market their services to clients if they’re not verified. If a client asks why they haven’t been verified they’ll have a difficult time explaining it…
I found this on investwhy.com:
Investment Firm XYZ contracted with a verification firm to have its claim of compliance verified. After performing their work, the verifiers concluded that they could not issue a verification report to Firm XYZ, as they do not believe that Firm XYZ is in compliance with the GIPS standards firmwide. The verifiers issued a statement to Firm XYZ confirming why they would not issue a verification report. What does Firm XYZ need to do? Firm XYZ must consider whether its claim of compliance is proper. The firm should carefully consider the issues presented by the verification firm and determine how to resolve them, as necessary, to assure its claim of compliance is appropriate. http://www.gipsstandards.org/program…ipsresults.asp
There is no requirement that a firm be verified, though most firms do, in fact, have this work done. There is nothing to prohibit a firm from claiming compliance if their verifier determines they are not able to issue a verification report. However, by virtue of this refusal, the firm should realize that they are deficient and should withdraw their claim. We have seen cases where they continue to claim compliance, though this isn’t recommended.
Consider posting other questions to http://www.gipshelp.com/. This was a great one!