Arin Stancil, Managing Director and Principal at Guardian Performance Solutions LLC, is our guest blogger.

As you have probably heard, earlier this year the CFA Institute proposed a new requirement for firms that claim compliance with the GIPS standards to provide annual notification to them of their claim. Well, it’s no longer a proposal. In September, despite mixed comments from the industry, the GIPS Executive Committee approved the new requirement, effectively making it a part of the GIPS standards.

Several of the responses that were received during the comment period expressed strong concerns about the proposal. Some felt that CFA Institute was overstepping its bounds by imposing this additional requirement on firms, that it was potentially time consuming, and that it didn’t have any real value. However, I think those concerns should be lessened now based on what was ultimately agreed to.

Comments matter: Changes from what was originally proposed GIPS Annual Notification Requirement

For one thing, the requirement was considerably scaled back based on the feedback received. Originally, the proposal had included an exhaustive list of items that would need to be provided, including the firm’s assets under management, the types of strategies and investment vehicles managed by the firm, and the name of the firm’s verifier. Most of this information has now been switched from required to optional and, though the final version of the form has yet to be released, the required details will reportedly be limited to:

• The name of the firm
• Address
• Contact information
• Verification status

The reporting deadline was also relaxed from March 31st until June 30th in order to allow firms more time to close their books following year-end. Additionally, firms will have the option to opt out of being included in the directory of GIPS compliant firms that CFA Institute is planning to make available on the GIPS standards website. Further, the CFA Institute has emphasized that all firm-specific information will be kept confidential.

Ultimately, my conclusion is that the aspects of this new requirement that are actually “required” are quite minimal and amount to information that, for the most part, is already publicly available. And, while it will impose a slight additional burden on firms that claim compliance to submit the form once a year, it isn’t something that should cause you to lose too much sleep at night.

From a personal perspective, I am actually excited to see the summary statistics that CFA Institute plans to release (hopefully by the end of 2015). We all know that there is fairly widespread acceptance and adoption of the GIPS standards in certain parts of the world, but in some areas the rates of compliance are a total mystery. It will be very interesting to know exactly how many firms claim compliance, how they are distributed geographically, and how many of them are undergoing the verification process.

About our guest blogger  GIPS Annual Notification Requirement

Arin Stancil, CFA, CIPM, is a Managing Director and Principal at Guardian Performance Solutions LLC, a specialty compliance consulting firm dedicated to assisting investment advisory firms to implement, maintain, and manage compliance with the Global Investment Performance Standards (GIPS®). Arin has been working with the GIPS standards for the past 14 years as a verifier, consultant, and practitioner. He is also a member of the United States Investment Performance Committee (USIPC), the official local sponsoring organization for the GIPS standards in the United States.

Note from Dave GIPS Annual Notification Requirement

We thank Arin for preparing this very informative post for us. This is a very important topic. I remain somewhat concerned about the gathering of this information, but hope that it will be kept confidential, as promised. I’m pleased that the amount of information that is being requested is much smaller, and hope that continues to be the case.