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2. The Scope of GIPS Standards with Respect to Definition of the Firm, Historical Performance Record, and Compliance

b. describe the scope of the GIPS standards with respect to an investment firm’s definition and historical performance record;

c. explain how the GIPS standards are implemented in countries with existing standards for performance reporting and describe the appropriate response when the GIPS standards and local regulations conflict;

Can a firm claim compliance with GIPS standards if they follow some or most of the rules? No. A firm must comply with GIPS on a firm-wide basis to claim compliance with the standards.

Can a firm choose which portfolios to include in the performance measurement process? No. 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. What are some different ways an entity can define itself? 1. An investment firm 2. A subsidiary or division of a larger company

How should total firm assets be measured? Total firm assets must be the aggregate of the fair value of all assets (discretionary and nondiscretionary) under management within the firm. This includes both fee-paying and non-fee-paying assets.

If a firm uses, and has discretion over the selection of, a sub-advisor, do those assets need to be included in a composite? Yes. Firms must include the performance of assets assigned to a sub-advisor in a composite, provided that the firm has discretion over the selection of the sub-advisor.

How many years of performance reporting is the minimum to be in compliance with GIPS? What is the exception? Firms must report a minimum of five years of compliant annual investment performance results, except for composites which have been in existence for less than five years (in which case, composite performance since inception must be presented).

After first presenting five years of compliant information, what does a firm need to do in subsequent years? The firm must add an additional year of compliant performance results each year until they reach 10 years of results.

If a firm has ten years of compliant data, do they need to only present five years at first? No, they can go straight to reporting ten years of data if they wish. Or they can present only the last five years and add a new year of performance annually.

Which version of the GIPS standards should firms comply with? Firms should use the 2010 version, which became effective in Jan 2011. Older versions can be used for results from before 2000.

If a firm meets ALL the compliance requirements set forth in GIPS, what is the appropriate language they can use in their performance presentations? “(Name of the firm) has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS).”

Can a firm say “we are in compliance with all GIPS standards, except …”? No. You’re either in compliance or you are not.