Exposure Draft of the Revised Guidance Statement on the Use of Supplemental Information

February 1, 2017

Proposed revisions to the Guidance on the Use of Supplemental Information were released for public comment on December 1, 2016.  The deadline for submitting comments is February 28, 2017.  We discuss key points from this draft Guidance Statement below.

Why is an update to this Guidance Statement necessary?  The GIPS Technical Committee reviews the guidance, interpretations, and Q&As of the GIPS standards. Over time it became apparent there were elements of the original, and current, Guidance Statement that needed clarification. The current Guidance Statement on the Use of Supplemental Information defines supplemental information as “any performance-related information included as part of a compliant presentation that supplements or enhances the required and/or recommended provisions of the GIPS standards.” It does not, however, define the term ‘compliant presentation’ therefore there was much confusion over what exactly had to be labeled as supplemental information and in what circumstances. Specifically, it was unclear whether or not performance-related information needed to be labeled as supplemental information if it appeared in a pitch book that contained a compliant presentation as an appendix.

What are the highlights? The following four items are the biggest changes within the proposed revision to the Guidance Statement.

  1. Confines ‘supplemental information’ to the GIPS compliant presentation. Information that is labeled as supplemental information in a compliant presentation should not be labeled as such if it appears outside of a compliant presentation.  Furthermore, supplemental information must be related to the composite being presented.
  2. Performance and/or performance-related information that appears in a marketing piece, but outside of a compliant presentation must be identified and appropriately described. In addition, firms must refer to the location of the compliant presentation in the marketing piece.
  3. Interpretation, guidance, and required disclosure on the use of theoretical performance information versus actual performance information. This includes model, back-tested, hypothetical, simulated, etc. results.
  4. False and misleading information examples were expanded to include composite performance compared to an inappropriate benchmark and performance that is not clearly labeled and described in a manner that clarifies the exact nature of the information being presented.

The intent of the proposed updates to the Guidance Statement is to help those firms claiming compliance with the GIPS standards better understand their obligations with regards to the use of supplemental information. While the language effectively isolates any performance or performance-related information that would need to be labeled as supplemental information to a GIPS compliant presentation, the Technical Committee is comfortable via increased reliance on provision 0.A.3, which prohibits the use of any false or misleading information.  The expected effective date is January 1, 2018.