April Deadline Approaches for Firms Claiming GIPS Compliance

For firms that claim compliance with the Global Investment Performance Standards (GIPS), the 2010 edition of the GIPS standards must be adhered to when presenting performance for periods after December 31, 2010. This means that come April, when many firms will begin presenting performance for the quarter ending March 31, 2011, all presentations that include performance results must comply with the requirements of the 2010 edition of the GIPS standards.

 With respect to valuation, GIPS 2010 requires assets to be valued at fair value, which can be challenging for assets that do not have readily available prices. Additionally, firms are no longer permitted to exclude difficult-to-value assets from composites if the portfolios that hold the assets are actual discretionary accounts that are charged a management fee. Additionally, in an effort to encourage firms to be verified, the GIPS compliance statement required by the 2010 edition of the standards must affirmatively state whether the firm is verified and what verification means. Firm that claim to be GIPS verified, must secure verification by year's end and must provide the firm performing the verification with a copy of the firm’s GIPS policies and procedures. In addition to several new disclosures required to be included in performance advertisements, the new GIPS standards also require that performance advertisements containing data for 36 months or more must report a three-year standard deviation, or explain why the three-year standard deviation is not relevant or appropriate.

 The CFA Institute has published a red-lined version of GIPS 2010, which shows what has changed from the previous edition of the standards. For additional information on the revised GIPS 2010 standards, please contact us at (619) 278-0020.