Level III Core · Overview of the Global Investment Performance Standards

Key Features, Scope and Fundamentals of Compliance with GIPS

Updated 8 October 2026 · Fact-checked

GIPS are voluntary, ethical standards for presenting investment performance. Only an investment firm can claim compliance, never an individual or a single product. The firm must meet all applicable requirements, and then it may use the prescribed compliance statement. Partial compliance cannot be claimed. Exam questions test these rules.

Understand Key Features, Scope and Fundamentals of Compliance

The Global Investment Performance Standards (GIPS) are a set of voluntary standards for calculating and presenting investment performance. Their aim is fair representation and full disclosure, so that prospective clients can compare managers on a like-for-like basis.

GIPS apply to firms, not to individuals. A firm is an investment firm, subsidiary or division that is held out to the public as a distinct business entity. A portfolio manager, a single strategy or a single product cannot claim compliance on its own. Compliance is claimed for the whole firm, and the firm then presents its performance by composites.

The standards are voluntary. No one is forced to adopt them, although clients and regulators may ask for them. Once a firm chooses to claim compliance, the rules become binding. The firm must meet all the requirements that apply to it. There is no partial compliance and no such thing as being compliant except for one item.

The standards contain requirements and recommendations. Requirements must be met to claim compliance. Recommendations represent best practice and are not needed to claim compliance, but firms are encouraged to follow them. A firm that skips recommendations can still claim compliance.

Once the firm meets all requirements, it must use the prescribed compliance statement. The statement may not be changed, and no wording may be added or removed. Claiming compliance means the firm is responsible for its own claim. Verification by an independent third party is optional. It does not replace the firm's own responsibility and is not a requirement for the claim.

Key rules to remember

Who can claim: Claimant = the firm (never an individual, product or single composite); Compliance is claimed on a firm-wide basis.
All-requirements rule: Compliance = all applicable requirements met; Recommendations are not needed to claim compliance. Partial compliance is not allowed.
Compliance statement: Firm claims compliance only by using the prescribed wording, unaltered; The statement format is fixed. The firm must not alter it, and it cannot say compliant 'except for' something.
Verification: Verification = optional, independent, firm-wide; It applies to the whole firm, not to a single composite. It does not itself make a firm compliant.
Responsibility: Firm is responsible for its own claim; Applies whether or not a verifier is used.

How to solve Key Features, Scope and Fundamentals of Compliance questions

Use this method for any question on who can claim compliance, the compliance statement or requirements versus recommendations.

1Identify who is making the claim. If it is a person, product or single composite, the claim is not valid on its own. Only the firm claims.
2Check whether the firm has met every applicable requirement. One missing requirement means no claim.
3Classify each item as a requirement or a recommendation. Failing a recommendation does not block the claim.
4Check the wording of any compliance statement. It must be the prescribed form, with no changes or exceptions.
5Separate verification from compliance. Verification is optional and firm-wide and does not create compliance.
6State your conclusion in one line, and give the reason using the key term (firm, all requirements, prescribed statement).

Quickest way: Four-question compliance check

When to use it: Use when an item set offers a claim and asks which statement is correct or whether the firm may claim compliance.

Who is claiming? It must be the firm.
Are all requirements met? Ignore recommendations.
Is the statement the prescribed wording, unaltered?
Is verification being treated as mandatory or as a replacement for the firm's responsibility? If so, it is wrong.

Common mistakes in Key Features, Scope and Fundamentals of Compliance

Saying an individual portfolio manager can be GIPS compliant.
Candidates link performance records to a person and forget the standards are firm-wide.
Fix: Remember that compliance is claimed by the firm only. Individuals and single products cannot claim.
Allowing a firm to claim compliance with a statement like 'compliant except for' one requirement.
It sounds reasonable and honest to disclose a gap.
Fix: There is no partial compliance. Either all applicable requirements are met or the claim cannot be made.
Treating recommendations as needed for the claim.
Candidates assume everything in the standards is mandatory.
Fix: Only requirements are needed. Recommendations are best practice and optional.
Believing verification is mandatory or that a verified firm is automatically compliant.
Verification and compliance sound like the same thing.
Fix: Verification is voluntary and independent. The firm is responsible for its own claim whether or not it is verified.
Changing or adding words to the compliance statement.
Firms want to explain their approach in the statement.
Fix: Use the prescribed wording exactly. Extra explanation goes elsewhere, not in the statement.

Worked examples

Example 1

A portfolio manager at a large asset management firm has a strong ten-year record in a global equity strategy. She states in marketing material that she is personally GIPS compliant. Explain whether this is valid and what the firm must do for a valid claim.

Show the solution

Identify the claimant: an individual manager.
Rule: GIPS apply to firms, not individuals, so an individual cannot claim compliance.
The firm may claim compliance only if it meets all applicable requirements firm-wide.
If it does, the firm uses the prescribed compliance statement unaltered.

Answer: The claim is not valid. Only the firm can claim compliance, after meeting all applicable requirements, and then by using the prescribed statement.

Example 2

A firm meets every GIPS requirement but has not adopted several recommendations and has not hired a verifier. A director proposes saying 'compliant, except that we have not followed all recommendations' in the statement. Evaluate the proposal and the firm's position.

Show the solution

Check the requirements: all are met, so the firm may claim compliance.
Recommendations are optional. Not following them does not stop the claim.
Verification is optional. Not hiring a verifier does not stop the claim.
The statement must be the prescribed wording. Adding an exception is not allowed, and it is also not needed.

Answer: The firm may claim compliance because it meets all requirements. It should use the prescribed statement unaltered and drop the proposed exception wording.

Exam tips

Look for the trap words 'individual', 'product' or 'partial'. They usually signal an incorrect option.
When a question mentions verification, ask whether it is being described as mandatory. If so, reject it.
Distinguish 'shall' style requirements from recommendations. Only the first group affects the claim.
In an essay set, answer with the rule first and then one short reason. The command word may be 'state' or 'justify', so match its length.

Key Features, Scope and Fundamentals of Compliance: frequently asked questions

Who can claim compliance with the GIPS standards?

Only an investment firm can claim compliance. Individuals, single products and single composites cannot. The firm must meet all applicable requirements first.

Can a firm claim compliance if it does not follow the recommendations?

Yes. Recommendations are best practice and are not needed to claim compliance. Only the requirements must be met.

What is the difference between GIPS compliance and verification?

Compliance is the firm's own claim that it meets all applicable requirements. Verification is an optional review by an independent third party, applied firm-wide. Verification does not remove the firm's responsibility for its claim.

Can a firm change the GIPS compliance statement?

No. The firm must use the prescribed wording without alteration. It cannot claim compliance except for certain items.