Complying with the Global Investment Performance Standards (GIPS®) is not a one‐time project that, once completed, can be checked off a firm’s to‐do list and set aside. GIPS compliance is an ongoing process that requires continuous maintenance and updates. Even if a firm receives a third‐party GIPS compliance verification, ongoing compliance cannot be ensured. GIPS verification is conducted at a particular point in time and is based on a review of a relatively small subset of the firm’s data. In order to effectively maintain compliance on an ongoing basis, firms should not rely entirely on their verification – they should also establish internal procedures and controls to monitor whether their GIPS compliance program is working as intended.
Implementing the below procedures will help ensure that your firm is meeting the ongoing obligations associated with claiming compliance with the GIPS standards:
- Timely Processes: Actively maintain your composites – not just once a year or when preparing for verification. The more frequently you update and review your composites (ideally, on a monthly basis), the more accurate they will be and the easier the process will become.
- Oversight: Implement a comprehensive review process to assess the accuracy of composite construction. This should involve testing the treatment of all new accounts, closed accounts, and accounts that experience strategy changes. There should also be a process for evaluating ongoing composite placement, such as reviewing performance outliers – composite members that perform in a manner that is materially different from the rest of the composite – to ensure that they continue to be included in appropriate composites.
- GIPS Policies and Procedures: Review and update your GIPS policies and procedures manual on at least an annual basis. Ensure that your manual not only addresses what is done to maintain compliance (the policies) but also how compliance is maintained (the procedures) and that it keeps up with changes in your business.
- Standard Operating Procedures: Separate from your GIPS policies and procedures manual, you should document standard operating procedures (SOPs) to outline step‐by‐step instructions for updating composites and presentation materials (including the different processes that are done monthly versus after year‐end). The SOPs should outline the systems used, sources for information, people involved and performance analysis that is conducted before performance is distributed.
- Stay Current: Monitor for any changes to the GIPS standards that may impact your firm, as well as changes to the regulatory requirements applicable to performance advertising. This could include signing up for email alerts, attending webinars or conferences, and having regular dialogue with your consultants and verifiers.
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