During this week’s GIPS(R) conference we learned that the GIPS executive committee was wrestling with the term “verification,” which has been part of these standards since 1999 and part of the prior AIMR-PPS(R) since ’93. The problem is that many don’t understand what the term means and presume it verifies compliance. For some time I’ve had my own campaign to try to clear this up, and am pleased that the EC is going to do something about it.
Recall that the GIPS 2010 proposal draft suggested that the claim of compliance include a reference to the firm’s status regarding verification: not verified, verified, verified but stale. I, as well as many others, preferred a simple “yes” or “no” approach, and the EC has decided to go that route. Hurrah! But you will also be required to include a definition of verification, which will indicate that it doesn’t verify compliance or the composite’s accuracy, but rather deals with the firm’s policies and procedures as well as composite construction. These are good changes which should enhance your presentation.
A new change, not part of the original draft, will allow firms to indicate that a composite’s been examined. This raises the importance of examinations, which some might feel is inappropriate. The idea is that examinations check the integrity of the information shown, so there is some interest and value in this. It will be interesting to see if as a result we see an increase in examinations, especially in Europe where these are rarely done.