The Global Investment Performance Standards (GIPS(R)) expects an asset manager or owner’s verifier to be independent, meaning that their assessment of the firm/organization must be objective, and not influenced by any other relationships or associations, or other work they may be doing with the client. To help foster the idea of independence, as well as to provide further background on the topic, a guidance statement was published several years ago.

Well, we now have an “exposure draft” that offers several revisions to the original. I addressed this during our “Keeping Up With GIPS” webinar yesterday. During that session, not only did we go over this document, but also the proposed guidance on risk, as well as the results of some of the feedback on the GIPS 20/20 Consultation Paper.

While there are several planned or proposed changes to the guidance, only two items are being asked about. I found this a bit unfortunate, as I think input should be sought on the other changes, as well. I’m confident the GIPS Executive Committee is open to hearing from the public on these items. However, the absence of targeted questions on them means that individuals must take the initiative to comment, something that most respondents don’t do.

I won’t go over everything here, but rather will address this topic in greater detail in this month’s newsletter. I will touch on one item. Please consider this wording:

“If the verifier serves as an advocate for the firm (e.g., the verifier promotes the firm through marketing efforts or acts on behalf of the firm in litigation or in resolving disputes w/third parties), it creates an independence issue.” Note it’s not “it may create,” but rather “it creates.

Consider the following possible events:

• We issue a press release announcing we’ve been chosen to be a firm or organization’s verifier (or, as we recently did in Pensions & Investments, publish an advertisement announcing such an event): are we, at the same time, promoting that client/organization?
• Our client issues a press release, announcing that they’ve been verified, and mentions that we were their verifier: are we aiding in promoting them?
• A client recently underwent an Securities & Exchange Commission examination, and had a few issues that they want us to help resolve with the SEC. If we offer testimony (written or verbal) on their behalf or offer any assistance, does this not involve us helping them with a dispute?

And so, in each of these cases, we would be creating an independence issue? I think not. However, the current wording clearly states that it would. I plan to comment on this.

Again, I’ll go into further detail on this in this month’s newsletter. We have until October 26 to comment. Hopefully, you’ll want to, in order to express your support for or disagreement with some of the planned changes. Stay tuned!