Continuing our discussion on some of the key findings from the feedback to the proposed changes to GIPS(r) …

Recall that the Executive Committee proposed a new recommendation, 0.B.2, that compliant firms provide their existing clients with a copy of their corresponding GIPS presentation on an annual basis. More than a third of the individuals who offered comments at all specifically commented on this proposal. And, of the 36 who responded, I only counted one that supports this idea…the rest said “no.” This was, as you’ll recall, one of those “hot button” items that I was especially concerned with. And even though this is merely a recommendation, individuals pointed out that since there’s another recommendation that compliant firms comply with all recommendations, and further since recommendations are “best practices,” this idea wasn’t deemed a good one. Hopefully it will be dropped from the final version.

Paragraph 4.A.20 is to be expanded, as per one of the proposals, to include a description of risk in the composite description within the presentation. I counted more than 70 responses. And these responses tended to be of three types: “yes,” “no,” and “need more guidance.” Almost half voted “no.” As one who also offered this response, I’m obviously hoping that the requirement gets dropped, but we’ll have to wait to see how the EC handles this “mixed bag” of comments.

And speaking of risk, paragraph 4.A.29 is a proposed requirement that firms provide 3-year annualized standard deviation. I’ve addressed this topic at length, indicating how I had been “on the fence” and then “fallen off,” to conclude that this isn’t a good idea. (As for “falling off the fence,” I used language like this in our June newsletter, which caused a response from my friend Carl Bacon, which will appear in our upcoming July issue). Close to 70 folks commented on this, with roughly two-thirds saying “no.” With such an overwhelming opposition, I am hopeful this will be dropped and replaced with a requirement for A risk disclosure, but of the firm’s choosing. I think this would be much more welcome by the GIPS and investment community.