Before claiming compliance with the GIPS standards, the firms must satisfy all the requirements of GIPS standards. Some of the requirements are:
a. The firms must comply with all the applicable laws and regulations regarding the calculation and presentation of performance
b. They must not present misleading performance
c. The GIPS must be applied on a firm-wide basis and not just for a few portfolios
d. The firm must document all the policies/procedures used in establishing and maintaining compliance with GIPS
e. Only GIPS compliant firms can claim that a portfolio was calculated following the GIPS standards
f. However, the calculation methodologies are not specified by GIPS; hence, the statements such as ‘following’, ‘in compliance with’, or ‘consistent with’, about the calculation methodology are prohibited
g. The firms should present all its clients with a compliant presentation at least once a year
h. The firms should present its prospective clients with a complete list of composite description, if requested, along with a compliant presentation for the composite listed
i. The firm must be either an investment firm, or subsidiary, or its division; held out to the clients as a distinct business entity, separate from the individual managers.
j. The changes in a firm’s organization must not lead to alteration of historical composite performance