I have been aware that there is no requirement for the Global Investment Performance Standards (GIPS(R)) to undergo a quinquennial revision; however, I believe there is an expectation for a review every five years in order to determine if a revision is in order. It appears that this may not be occurring this time.

It has been rumored that changes to the Standards will be introduced into guidance statements, which I find somewhat upsetting. I have opposed such acts, as they invariably lead to problems. Two cases in point:

1) The Significant Cash Flow guidance, which I worked on, introduced required disclosures, which were easy to overlook. Unfortunately, when the 2005 edition of the Standards was published, we overlooked these guidance statement-embedded required disclosures, making the job of the GIPS folks who took advantage of significant cash flows a bit cumbersome. It was just too easy to miss the required disclosures, which many firms did.

2) The Error Correction guidance introduced requirements which were not in the previously publicly reviewed version (I have previously offered my view that such major changes warranted the document going back out to the public). When GIPS 2010’s draft was circulated, many of us saw for the first time these requirements; the public responded in opposition. And so, they were dropped from the Standards, but remained in the “GS,” meaning they remained in effect. Much confusion resulted, which I think made the final hours of the 2010’s birth overly challenging.

The intent of the GS is to offer guidance on the Standards, not to impart new rules. It’s interesting to note that because of the Error Correction problem, guidance was needed on the guidance, which came in the form of a Q&A.

The 2010 edition was much more extensive than the 2005 version; perhaps one might suggest unnecessarily so. The Standards still warrant a five-year review and, if it’s determined changes are needed, for it to be revised, not for them to be introduced via a backdoor approach (i.e., guidance statements). I do hope the rumor proves to be a false one, and that the GIPS Executive Committee will invest the time to revise the Standards and, if necessary, provide guidance on the rules, not impart new ones through guidance.