Ethical and Professional Standards

Reading 4. Introduction to the Global Investment Performance Standards (GIPS)

Learning Outcome Statements

c. explain the requirements for verification.

CFA Curriculum, 2020, Volume 1

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Subject 4. Verification

Verification refers to the independent review of a firm's performance measurement processes and procedures. Verification applies to the firm as a whole, not to individual composites.

Verification tests:

  • Whether the firm has complied with GIPS composite construction requirements on a firm-wide basis.
  • Whether the firm's processes and procedures are designed to calculate and present GIPS-compliant performance results.

Again, the focus of verification is not on individual composites, but on the processes the firm follows to form composites and calculate and report performance.

At this point, verification is not mandatory, but it is strongly recommended. Firms may claim compliance, but independently-verified compliance adds credibility to those claims. It is recommended that firms have all years for which they are claiming compliance verified.

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User Contributed Comments 4

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jainrajeshv

It is talking about the independent review of compliance of GIPS

sahilb7

Yes. An independent review of the firm as a whole. Not of the indivudual composites.

malecu90

If the GIPS standards are not mandatory, why is verification based on them solely? If a firm doesn't follow GIPS standards, can it still be compliant?

xp_acctant

who does the verification?