tag:blogger.com,1999:blog-2568941354104807757.post1007218239224321990..comments2023-10-05T09:07:24.225-04:00Comments on Investment Performance Guy: True or False: Verification verifies a firm's claim of compliance with GIPS?Dave Spauldinghttp://www.blogger.com/profile/01777929408680234896noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2568941354104807757.post-42254396409986002132012-10-09T11:40:37.563-04:002012-10-09T11:40:37.563-04:00Steve, I agree completely. And yes, more than sema...Steve, I agree completely. And yes, more than semantics; "lawyer talk" is probably a good point, too.<br /><br />Under AIMR-PPS, the "big 8" (now the "final 4") would not do "Level 1's" (analogous to GIPS "verifications") because, I believe, of this requirement to "verify compliance." It got dropped, and now these very firms WILL do verifications. I suggested to a former CFAI person that the "verification was weakened" because of this very reason. I was told I was incorrect. Perhaps THAT's a matter of semantics!<br /><br />Thanks for your contribution.Dave Spauldinghttps://www.blogger.com/profile/01777929408680234896noreply@blogger.comtag:blogger.com,1999:blog-2568941354104807757.post-73798025147780470022012-10-09T10:06:25.353-04:002012-10-09T10:06:25.353-04:00Interesting post. I would expect this to generate ...Interesting post. I would expect this to generate some cantankerous comments, as it does "go against the grain" of the common understanding of verification...plus this issue is close to the heart (and the pocketbook) for many.<br /><br />You are somewhat diplomatic when you suggest that this may simply be semantics. I think it's more likely to be simply "lawyer talk." One job of a firm's legal staff is to help avoid situations where the firm gets boxed into a corner - no one wants to be put into a situation that is legally actionable. Firms generally try to avoid making any statement that can be interpreted as a guarantee. As a result, we end up with relatively vague-sounding statements such as the ones you cited. Why? Because if you guarantee something, then you can be forced to make good on your statement when something goes wrong. You may ask: "What's wrong with that? That's what manufacturers do when they sell a product." True, but this is not like replacing a bad toaster; just consider how much recalls cost the auto industry. A small firm offering verification services could be bankrupted by an unfavorable judgment regarding a verification gone bad and the economic loss that can be attributed to an investment based on a firm's erroneous performance results. <br /><br />So this may raise the question: "What good is a verification?" Like most things, it's probably only as good as the firm performing the verification. The investment business is one where success is based on sound judgment. I think this helps to make the case for a program to verify the verifiers. If we have to content ourselves with only "additional confidence" in someone's "claim of compliance" then its wise to ask for a third-party validation of the credentials of those performing the audit... sorry, I meant "verification." Stephen Campisi, CFAnoreply@blogger.com