At last count there are almost 120 comment letters on the GIPS website regarding the proposed changes to the standards (visit https://www.gipsstandards.org/news/releases/2009/view_comments.html). Some are as short as a paragraph or two, while others exceed 20 pages. So far I haven’t read them all but am making it through quite a number of them.
My unofficial assessment is that there are certain recommended changes that folks are very strongly opposed to:
- the recommendation that compliant firms provide their clients with the GIPS composite presentations for the composite(s) they’re in on an annual basis. Not much support here.
- the requirement for 3-year annualized standard deviation. While many folks support having risk, there doesn’t seem to be much support for the measure being standard deviation.
- the requirement to disclose, for a year, corrections to any material errors on composite presentations. This has received a lot of “push back,” which is interesting since the requirement goes into effect this coming January (because of the GIPS Executive Committee’s approval of the revised Error Correction Guidance Statement). If this does get rejected from GIPS 2010, will this mean that the GS gets dropped? Hopefully so.
- the requirement to disclose the percent of “proprietary assets.” Some mixed views here. Some folks feel the definition is too broad (as it includes investments of senior management, as well as owners and the firm). Many others reject it entirely.
- the requirement to not provide a presentation to prospects below the firm’s minimum wasn’t well received, either. A few correctly pointed out that this wasn’t a change from a recommendation to a requirement.
I don’t know if there will be more letters posted or not. I think it’s very fair that the GIPS EC has (a) allowed us to comment and (b) posted these comments for everyone to read. I’m very pleased that SO many individuals and firms took the time to comment. I’m also thrilled by the comments from many country sponsors, especially from some of the newer ones (e.g., Pakistan). The EC welcomes these voices. The EC works hard to make the standards better and must consider lots of ideas. I’m aware that some of what has been presented isn’t supported by 100% of this group, which shouldn’t be surprising. The EC will, I’m sure, consider all the comments before finalizing what will end up in the next edition. And, I know they will be VERY busy over the next few months working on this. AND, I know that the CFA Institute’s staff will be VERY busy, too, as they assemble these materials. We owe the volunteers and the CFA Institute our thanks and appreciation, as this isn’t an easy task. We are all looking forward to learning more in the coming months.
One important point to know: this ISN’T a vote; that is, I don’t expect the EC to tabulate the “pros” and “cons” and decide what to do based on what was sent in. But, I believe they definitely take into consideration what has been written.