The Global Investment Performance Standards (GIPS) were created by the Chartered Financial Analyst Institute to standardize investment firms’ reporting guidelines and profitability globally. GIPS encapsulates seven standards, including professionalism, integrity, customer service, and diligence. The standards ensure compliance with rules, regulations, and laws governing the accounting profession, and brokers must prioritize clients’ interests. The GIPS also require investment recommendations to be backed by research and evidence and prohibit compromising conduct.
Global Investment Performance Standards (GIPS) were developed by the Chartered Financial Analyst Institute to standardize an investment firm’s reporting guidelines and profitability. The CFA Institute introduced these ethics standards in 1999 to ensure that investment managers make full disclosure of investment performance in different countries. Regulation, performance measures, and investment practices vary in different countries, but the Global Investment Performance Standards provide a worldwide set of performance reporting standards that give companies the ability to penetrate global markets. .
Several key features of the Global Investment Performance Standards reflect the basic elements that a financial planner or financial analyst uses to present performance information for an investment management firm. GIPS encapsulates seven standards that these companies must meet. These standards include things like professionalism, integrity, customer service, and diligence.
The first standard of global investment performance is professionalism, which requires a high level of ethics even if a problem is not identified in writing. Financial professionals must comply with the rules, regulations, and laws that govern the accounting profession. This applies even in countries where securities laws are not strict. A chartered financial analyst must comply with the Code and Standards in this situation.
Capital markets integrity is another standard that addresses the use of non-public information. Investment firms cannot act on nonpublic information that could affect the value of a stock. This is considered inside information when an investor acquires information about a stock to sell or buy before the information is made public.
The Global Investment Performance Standards recognize the fiduciary obligations brokers have to clients. The interests of the clients are placed above the interests of the company or the broker. This includes advising the client on investment risks and ensuring that the information provided is accurate, complete and fair. The first duty of the brokers is with the client. Global investment performance standards require brokers to perform their assigned tasks in accordance with the skills and abilities required for the position. Brokers must not disclose confidential information or cause harm to the investment firm.
The GIPS for Investment Research, Recommendations and Actions address due diligence and a reasonable basis. A financial analyst must analyze investments and make investment recommendations. These recommendations must be backed by research and evidence. In addition, the basic format and guiding principles of the recommendations should be disclosed to clients and prospective clients. This information must also distinguish between fact and opinion.
Global investment performance standards require members of the CFA Institute to avoid compromising conduct. This type of behavior could affect the integrity or reputation of the CFA Institute. Members must also not misrepresent the implications of membership in the institute.
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