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July 14, 2017 TO: ICI MembersICI Global Members SUBJECTS: Advertising
Compliance
Disclosure
Fund Accounting & Financial Reporting
International/Global
Investment Advisers RE: ICI Submits Comment Letter on GIPS 20/20 Consultation Paper
The CFA Institute issued its GIPS® 20/20 Consultation Paper (the “consultation paper”) in May.[1] ICI submitted a comment letter in response today, attached below.
Summary of the Consultation Paper
The consultation paper contemplates a restructuring of GIPS, with “the relationship between the party presenting performance (i.e., the investment manager or asset owner) and the receiver of the information (i.e., prospective client, prospective pooled fund investor, or oversight board) [being] the defining criterion regarding how performance should be presented.” With respect to pooled funds generally, the paper emphasizes the importance of fund performance (rather than composite performance). Further, “firms managing any type of pooled fund would be required to present to prospective investors in those funds a pooled fund report that would include only the pooled fund’s information.” The paper proposes that investment management firms be required to provide the pooled fund report to existing investors on an annual basis, or alternatively, make an offer to do so. In describing these proposed items, the consultation paper is not very specific, and it is unclear what the intended relationship would be between regulated funds’ extensive existing legal and regulatory requirements and the pooled fund performance reports that the paper contemplates.
Summary of ICI’s Comment Letter
ICI’s comment letter strongly urges the CFA Institute to exclude regulated funds from the scope of this project. It notes that the consultation paper makes no attempt to analyze pooled funds’ current reporting requirements, a step that must precede any consideration of whether new standards are warranted. It recommends that if the CFA Institute wishes to move forward with pooled fund-specific performance reporting standards for at least some portion of the pooled fund universe, it must appropriately tailor them with existing legal or regulatory requirements in mind. It states that no justification exists for imposing additional requirements on firms managing pooled funds already subject to legal or regulatory performance reporting requirements, and that highly-regulated performance reporting is already an integral part of regulated funds’ ongoing responsibilities to current and prospective investors.
Matthew Thornton
Assistant General Counsel
endnotes
[1] Available at www.gipsstandards.org/standards/Documents/Guidance/gips_2020_consultation_paper.pdf. See Institute Memorandum No. 30755, dated June 22, 2017, for additional background.