Committers of fraud need not apply...

You have perhaps heard that Abercrombie & Fitch is actually paying members of the reality show, Jersey Shore, money to not use their products; the individual known as "the situation" is one who has been particularly focused on. In this weekend's WSJ, Joe Queenan addresses the topic of hoping for certain individuals to avoid their products in "Please Don't Endorse Our Product."

This made me think of the case where a few firms embraced the Global Investment Performance Standards (GIPS(R)) who shouldn't have. The on-line publication Fundfire ran a few pieces on this, where they identified managers who were charged with fraud, who had not only claimed compliance but had also managed to get verified.

As I recently pointed out, the act of "claiming" compliance doesn't take much effort; anyone can do it. The real test is whether or not the firm actually is compliant. And while we expect verification to help determine this, it has been stated that this voluntary exercise isn't intended to identify fraud, and so the fact that a few tricksters were able to achieve a successful verification isn't necessarily a rap against this exercise.

But clearly, those of us who support the standards would prefer that firms that are less than ethical simply avoid claiming compliance; adding a fraudulent claim to their existing misdeeds might result in discrediting this important standard, which clearly we don't want to see.