Ethical and Professional Standards
Reading 4. Introduction to the Global Investment Performance Standards (GIPS)
Learning Outcome Statements
a. explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards;
CFA Curriculum, 2020, Volume 1
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Subject 2. Parties Affected by GIPS
The GIPS standards apply primarily to investment management firms. The performance results of firms adopting GIPS will be more readily comparable. However, while firms are encouraged to adopt GIPS, the standards are voluntary.
2. CFA Institute's Members, CFA Charterholders, and CFA Candidates
- GIPS are a way of ensuring that no material misrepresentation of performance takes place.
- GIPS satisfy Standard V (B) Communication with Clients and Prospective Clients.
- Members, charterholders and candidates should inform employers of GIPS and encourage their adoption (though this is not mandatory).
3. Prospective and Current Clients
- They are the primary beneficiaries of GIPS.
- GIPS allow effective comparisons; they can directly compare the performance results of firms adopting GIPS.
- Clients must still use due diligence.
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firms claiming GIPS compliance provide investors with assurance that performance is reported completely and fairly. GIPS compliance gives investors confidence in the integrity of performance presentations and facilitates the comparison of performance presentations among firms that claim GIPS compliance.
The official CFA materials also says that only investment management firms that "actually manage assets" can claim compliance with GIPS.
Who can claim compliance?
1) Investment management firms that actually manage assets can choose to claim compliance to GIPS.
2) Compliance is a firm-wide process. Either 100% in compliance or 0% compliance.
Who cannot claim compliance?
Plan sponsors or consultants or software vendors because they do not manage assets. They either influence / support an investment firm who manage assets to claim compliance
Only investment management firms who actually manage assets can claim compliance.
Both investment management firms and prospective clients benefit from the compliance as historical track record is both complete and fairly represented, and investors have higher level confidence in integrity of performance.
whether CFA members/charterholders and candidates must comply with GIPS or just voluntarily comply ?
@thrth: It is voluntary in nature.