Advertising Request for Public Comment v.21
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Advertising Request for Public Comment v.21

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INVITATION TO COMMENT: ®The Addition of Advertising Guidelines to the GIPS Standards The Investment Performance Council (IPC) of the Association for Investment Management and ®Research (AIMR ) seeks comment on the proposals set forth below regarding the addition of Advertising Guidelines to the Global Investment Performance Standards (GIPS) to permit a GIPS-compliant firm to advertise its claim of compliance with the Standards. Comments must be submitted in writing and be received by AIMR no later than 31 December 2002. All comments and replies will be put on the public record. Comments should be addressed to: Association for Investment Management and Research Professional Standards & Advocacy Department Reference: GIPS Advertising Guidelines P.O. Box 3668 Charlottesville, Virginia 22903 FAX: 1-434-951-5320 E-mail: standardsetting@aimr.org AIMR accepts responses by fax or e-mail, but it would be helpful if a hardcopy response is submitted as well. Executive Summary The Advertising Subcommittee was created in September 2001 to develop guidelines to provide the global investment community with a set of ethical standards for investment management firms to follow when advertising GIPS compliance. As both investment management firms and prospective clients place value in compliance with the GIPS standards, the Subcommittee feels it is paramount to provide the industry with guidelines for communicating both GIPS compliance and ...

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INVITATION TO COMMENT:
®The Addition of Advertising Guidelines to the GIPS Standards

The Investment Performance Council (IPC) of the Association for Investment Management and
®Research (AIMR ) seeks comment on the proposals set forth below regarding the addition of
Advertising Guidelines to the Global Investment Performance Standards (GIPS) to permit a
GIPS-compliant firm to advertise its claim of compliance with the Standards.

Comments must be submitted in writing and be received by AIMR no later than 31 December
2002. All comments and replies will be put on the public record. Comments should be
addressed to:

Association for Investment Management and Research
Professional Standards & Advocacy Department
Reference: GIPS Advertising Guidelines
P.O. Box 3668
Charlottesville, Virginia 22903
FAX: 1-434-951-5320
E-mail: standardsetting@aimr.org

AIMR accepts responses by fax or e-mail, but it would be helpful if a hardcopy response is
submitted as well.

Executive Summary

The Advertising Subcommittee was created in September 2001 to develop guidelines to provide
the global investment community with a set of ethical standards for investment management
firms to follow when advertising GIPS compliance. As both investment management firms and
prospective clients place value in compliance with the GIPS standards, the Subcommittee feels it
is paramount to provide the industry with guidelines for communicating both GIPS compliance
and investment performance. Therefore, it has developed the attached GIPS Advertising
Guidelines to serve as industry global best practices for the advertisement of GIPS-compliance
and performance results.

The GIPS Advertising Guidelines do not replace the GIPS standards nor do they absolve firms
from presenting performance presentations that adhere to the requirements of the full GIPS
standards. The Guidelines can only be applied to firms that already satisfy all of the
requirements of the Standards on a firmwide basis and claim compliance with the Standards.
Firms that claim compliance can choose to advertise that claim using the GIPS Advertising
Guidelines.

Background

®The Global Investment Performance Standards (GIPS ) provide the investment community with
a set of ethical standards for investment management firms to follow when presenting their
performance results to potential clients. The Standards serve to provide greater uniformity and
comparability among investment management firms, without regard to geographic location, and
-1 - to facilitate a dialogue between investment firms and their prospective clients about the critical
issues of how the firm achieved historical performance results and how it will manage future
investment strategies. However, to date, the GIPS standards have not addressed the issue of
advertising a firm’s claim of compliance.

In an attempt to permit firms to advertise that they comply with the Standards without
reproducing an entire GIPS compliant presentation the Subcommittee has developed the GIPS
Advertising Guidelines. The Subcommittee is of the opinion that these Guidelines will not only
provide benefit to GIPS-compliant firms, but that firms that do not claim compliance with the
GIPS standards will also benefit by having Guidelines for creating advertisements in a
meaningful and ethical manner.

According to the Advertising Subcommittee Terms of Reference, the Subcommittee has many
other objectives relating to the communication of investment performance and GIPS compliance,
as well as establishing global best practices for marketing information. It will continue to
research and discuss these issues in an effort to develop additional proposals for IPC review in
the future.


Summary of the Proposed GIPS Advertising Guidelines

Effective Date
The GIPS Advertising Guidelines will apply from the Effective Date forward. The proposed
Effective Date for these Guidelines is 1 May 2003. This is likely the earliest date that the
Guidelines can become effective given the estimated time needed for public comment and
IPC and AIMR Board approval. On this date, the GIPS Advertising Guidelines will replace
all previous guidance on the subject.

Mandatory versus Voluntary
The Guidelines are mandatory for firms that include a claim of compliance in their
advertisements. The Guidelines are voluntary for GIPS-compliant firms that choose not include
a claim of compliance in their advertisements. All firms, irrespective of their compliance with
GIPS or their approach to advertising their compliance, are encouraged to abide by these ethical
guidelines.

Advertisements That Include a Claim of Compliance
All advertisements that include a claim of compliance must include:

1. A description of the firm.
2. How an interested party can obtain a GIPS-compliant presentation and list and
description of all firm composites.
3. The GIPS Advertising Guidelines Claim of Compliance Statement.

Advertisements That Include a Claim of Compliance and Performance Results
All advertisements that include a claim of compliance and present performance results must also
include the following information in addition to items 1-3 above. This information must be
taken from a presentation that adheres to the requirements of the GIPS standards:
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4. A description of the strategy of the composite being advertised.
5. Year-to-date composite performance results in addition to:
- 1-, 3-, and 5- year annualized composite performance returns (or annualized
period since firm inception if inception is less than 1, 3, or 5 years). The
annualized returns should be calculated through the same period of time as
presented in the corresponding compliant presentation; or
- 5 years of annual composite performance returns. The annual returns should be
calculated through the same period of time as presented in the corresponding
compliant presentation.
6. Whether results are presented gross or net of investment management fees.
7. The benchmark return for the same periods for which the composite return is presented.
8. The currency used to express performance.
9. The description of the use and extent of leverage and derivatives, if leverage or
derivatives are a part of the investment strategy of the composite.

Supplemental Information
Firms are encouraged to present supplemental information, provided the supplemental
information is shown with equal or lesser prominence than the information required under the
Guidelines.


Comment Requested

• Do you support AIMR’s effort to develop Advertising Guidelines to be added to the
GIPS standards?
• Do you agree with the proposed Effective Date of 1 May 2003?
• Do you agree with the information and disclosures required in both of the scenarios
(advertisements that include a claim of compliance and advertisements that include both a
claim of compliance and performance results)? Should additional information be
provided in an advertisement? Are there too many required disclosures?
• At some point in the future, should the GIPS Advertising Guidelines be mandatory for all
GIPS-compliant firms? In other words, should a GIPS-compliant firm be required to
follow specific rules when advertising, regardless of whether the advertisement includes a
claim of compliance?
• Should AIMR consider any other methods for creating Advertising Guidelines for the
GIPS standards?

If commentators put forward other proposals, AIMR requests they explain how their proposals
satisfy these objectives.
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GIPS ADVERTISING GUIDELINES


Proposed Effective Date: 1 May 2003

A. PURPOSE OF THE GIPS ADVERTISING GUIDELINES

Purpose
®The Global Investment Performance Standards (GIPS ) provide the investment community with
a set of ethical standards for investment management firms to follow when presenting their
performance results to potential clients. The Standards serve to provide greater uniformity and
comparability among investment firms, without regard to geographic location, and to facilitate a
dialogue between investment firms and their prospective clients about the critical issues of how
the firm achieved historical performance results and how it will manage future investment
strategies.

The GIPS Advertising Guidelines attempt to serve as the industry global best practices for the
advertisement of performance results. The GIPS Advertising Guidelines do not replace the GIPS
standards nor do they absolve firms from presenting performance presentations that adhere to the
requirements of the full GIPS standards. The Guidelines can only be fully applied to firms that
already satisfy all of the requirements of the Standards on a firmwide basis and claim compliance
with the Standards. Firms that claim compliance can choose to advertise that claim using the
GIPS Advertising Guidelines.

The Guidelines are mandatory for firms that include a claim of compliance in their
advertisements. The Guidelines are voluntary for GIPS-compliant firms that choose not include
a claim of compliance in their advertisements. All firms, irrespective of their compliance with
GIPS or their approach to advertising their compliance, are encouraged to abide by these ethical
guidelines.

Definition of Advertisement
For the purposes of these Guidelines, an advertisement includes any materials that are
distributed or designed for use in newspapers, magazines, firm brochures, letters, or any other
written or electronic material distributed to more than one person. Any written material (other
than one-on-one presentations and individual client reporting) distributed to maintain existing
clients or solicit new clients for an advisor is considered an advertisement.

Relationship of GIPS Advertising Guidelines to Regulatory Requirements
The GIPS Advertising Guidelines are guidelines that promote an ethical framework for
advertisements. They do not change the scope of the activities of local regulatory bodies
regarding the regulation of advertisements. Firms advertising performance results must also
adhere to all applicable regulatory rules and requirements governing advertisements. Firms are
encouraged to seek legal counsel, as it is likely additional disclosures are required. In cases
where applicable law or regulation conflicts with the GIPS Advertising Guidelines, the
Guidelines require firms to comply with the law or regulation. However, for purposes of these
Advertising Guidelines, the conflict need not be disclosed.
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B. THE REQUIREMENTS OF THE GIPS ADVERTISING GUIDELINES

All advertisements that include a claim of compliance must include the following:

1. A description of the firm.
2. How an interested party can obtain a GIPS-compliant presentation and list and
description of all firm composites.
3. The GIPS Advertising Guidelines Claim of Compliance Statement:
[Insert name of firm] claims compliance with the Global Investment Performance
®Standards (GIPS ).

All advertisements that include a claim of compliance and present performance results
must also include the following information in addition to items 1-3 above (the information
must be taken from a presentation that adheres to the requirements of the GIPS
standards):

4. A description of the strategy of the composite being advertised.
5. Year-to-date composite performance results in addition to:
a. 1-, 3-, and 5- year annualized composite performance returns (or annualized period
since firm inception if inception is less than 1, 3, or 5 years). The annualized returns
should be calculated through the same period of time as presented in the
corresponding compliant presentation; or
b. 5 years of annual composite performance returns. The annual returns should be
calculated through the same period of time as presented in the corresponding
compliant presentation.
6. Whether performance is shown gross or net of investment management fees.
7. The appropriate composite benchmark return for the same periods for which the
composite return is presented. (The appropriate composite benchmark return is the same
benchmark total return as presented in the corresponding compliant presentation.) If no ark is presented, the advertisement must disclose why no benchmark is presented.
8. The currency used to express performance.
9. The description of the use and extent of leverage and derivatives, if leverage or
derivatives are a part of the investment strategy of the composite.

Supplemental Information
Firms are encouraged to present supplemental information in addition to the information required
under the GIPS Advertising Guidelines, provided the supplemental information is shown with
equal or lesser prominence than the information required under the Guidelines.



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