Definition of the Firm
It is intended that GIPS compliance be available to any firm. A firm must comply with GIPS on a firm-wide basis to claim compliance with the standards. All actual, fee-paying, discretionary portfolios managed by the firm must be included in the performance-measurement process.
To be in compliance, an entity must state how it defines itself as a firm.
Historical Performance Record
Firms should present their long-term performance records. To be in compliance, a firm must:
The goal is to have 10 years of GIPS-compliant performance results presented. To encourage firms to participate, GIPS only requires five years of data to initially come into compliance, allowing the full 10 years of performance results to be built over time. There is nothing to prevent a firm from initially presenting a full 10 years of compliance results. To maintain compliance, a firm presenting less than 10 years of performance results must increase the number of years of performance results presented.
Claim of Compliance
Which version of GIPS standards should firms comply with?
The revised GIPS standards were adopted in 2010 and became effective on January 1, 2011. Although early adoption of these revised GIPS standards is encouraged, firms can still use the old version for performance presentations that include results through December 31, 2010.
In order to claim compliance, a firm must meet ALL the requirements set forth in GIPS. Firms that fully comply with GIPS may use the following compliance statement in their performance presentations: "[Name of the firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS)."
With regard to compliance, a firm is either in compliance or not in compliance. Firms may not make any claims to being "in compliance except for..."
Appropriate disclosure when the GIPS standards and local regulations are in conflict:
GIPS standards serve as minimum worldwide standards. If local laws are stricter than GIPS, local laws should be applied. If local laws don't exist or are less strict than the GIPS, the GIPS should apply. In cases of conflicts with GIPS, the standards require that local laws and regulations take precedence over GIPS.
Firms should disclose any conflicts.
|geet: Returns are computed net of transactions cost but the firm has to disclose if they are using net or gross of costs.....if they have to use net of cost why do they have to disclose?|
|tengo: The issue is returns are reported net of transaction costs but a management fee is not technically a transaction cost so you could report net of mgmt fees or gross but you must disclose what approach you take|
|Slothrop: How is the "net of transaction costs" issue relevant to the Vision statement?|
|surob: For real, how?|
| Khadria: Under section|
(e) Why is a global standard needed? How is it being implemented?
it is stated:
"When applicable local or country-specific law or regulation conflicts with the GIPS standards, firms should comply with the GIPS standards in addition to those local requirements."
but in this section it says:
"In cases of conflicts with GIPS, the standards require that local laws and regulations take precedence over GIPS."
WHAT IS TRUE?
|AnhDoUM: I noticed that too. I think the latter one is true. CFAI's readings are confusing.|
|Challs: yeh...that one kinda stumped me too|
| bobert: Oh, ok I think i got it. If the local law is more strict, there is really no conflict from the way things are already done. If there is, GIPS is used because it is more strict, but in addition to all other local requirements because they need to be adhered to as well. |
That sound about right?
| StanleyMo: firms should comply with the GIPS standards in addition to those local requirements|
means we need to follow local requirement and only comply with the GIPs standards additionally.
|jainrajeshv: No qualifications should be added.|
|Mamakuboy: What the mean is where local laws are less strict than the GIPS, the GIPS should be followed in addittion to meeting the local regulations. However, where local regulations expressly state that information is only to be presentated in a particular manner, and this is in conflict with the GIPS, the local regulations are to be followed not the GIPS. Remembering that while you only need to present this information following the local regs, you need to state that this is in conflict with the GIPS. This last disclosure is required for companies claiming compliance to the GIPS.|
|YOUCANDOIT: StanleyMo's explanation made the most sense to me.|
|tybe0012: minimum of 5 years with an additional year added up to 10 years. For performance less than 5 years, track performance since inception.|
|tybe0012: no partial compliance, no parital designation.. no partial nottin|
|gerdvar: I think the law/GIPS conflict is solved by the comments above, should the local law conflict with GIPS in a exclusionary manner (ie. performance should only be presented in particular manner), then applying the local law and disclosing the conflict is needed to comply. On the other hand, where local laws are not exclusionary (ie. performance should be presented in particular manner, but one can present it in another), one would need to present both presentations (law and GIPS) simultaneously, disclosure of conflicts wouldnt be enough in this case. What do you think?|