Fundamentals of compliance—requirements

• Must comply with all the requirements of the GIPS standards
• Must comply with all applicable laws and regulations regarding the calculation and presentation of performance.
• Do not present performance or performance-related information that is false or misleading.
• Must apply GIPS standards on a firm-wide basis
• Must document their policies and procedures used in establishing and maintaining compliance with the GIPS standards.
• Once GIPS requirements have been met, the following compliance statement must be used: " [Insert name of firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®),"
• There is no partial compliance. Do not make any other statements that may indicate partial compliance with the GIPS standards.
• Do not use any statements referring to the calculation methodology as being “in accordance,” “in compliance,” or “consistent” with the GIPS Standards.
• Do not use any statements referring to the performance of a single, existing client portfolio as being “calculated in accordance with the Global Investment Performance Standards”, except when a GIPS-compliant firm reports the performance of an individual client’s portfolio to that client.
• Must make every reasonable effort to provide a compliant presentation to all prospective clients. As long as a prospective client has received a compliant presentation within the previous 12 months, the firm has met this requirement
• Must provide a complete list of composite descriptions to any prospective client that makes such a request. Include terminated composites on the firm’s list of composite descriptions for at least five years after the composite termination date.
• Firms must be defined as an investment firm, subsidiary, or division held out to clients or prospective clients as a distinct business entity.
• Total firm assets must be the aggregate fair value of all discretionary and non-discretionary assets managed by the firm. This includes both fee-paying and non-fee-paying portfolios.
• Total firm assets must include assets assigned to a sub-advisor provided the firm has discretion over the selection of the sub-advisor.
• Changes in a firm’s organization must not lead to alteration of historical composite performance.
• When the firm jointly markets with other firms, the firm claiming compliance with the GIPS standards must be sure that it is clearly defined and separate relative to other firms being marketed, and that it is clear which firm is claiming compliance.

Fundamentals of compliance—recommendations

• Firms should comply with the recommendations of the GIPS standards.
• Firms should be verified.
• Firms should adopt the broadest, most meaningful definition of the firm. The scope includes all geographical (country, regional, etc.) offices operating under the same brand name regardless of the actual name of the individual investment management company.
• Firms should provide to each existing client, on an annual basis, a compliant presentation of the composite in which the client’s portfolio is included.