Verification verifies a firm's compliance with GIPS:
true or false?
Simple question, right? What does it mean to be verified?
Is it not intuitive that verification would verify compliance with GIPS (Global Investment Performance Standards)? It's probably not surprising therefore that many, if not most, of those attending will respond "true."
Therefore, it's also not surprising that when they learn that the statement is false, they appear a bit perplexed.
If you check the Standards' glossary you'll learn that verification is "a process by which an independent verifier assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards."
Going through the Standards we also find that it "tests the construction of the firm’s composites as well as the firm’s policies and procedures as they relate to compliance with the GIPS standards." And while it "is intended to provide a firm and its existing clients and prospective clients additional confidence in the FIRM’S claim of compliance with the GIPS standards," and that it "brings additional credibility to the claim of compliance" [emphasis added] it does not specifically verify compliance.
Semantics? Perhaps, but we should be accurate in our claims.
We sometimes see statements such as "XYZ verified our compliance with the Standards." This is technically incorrect, since a verifier does not verify claims of compliance.
Under the AIMR-PPS(R), the verifier did verify compliance; however, this provision did not carry over to GIPS.
Confused? You're not alone.