1. Fees: It's important to be thoughtful about how your firm's fees flow through to your GIPS Reports and Policies & Procedures document. It's an SEC focus area and fees change enough to warrant a fall review.

• If using Model Fees:
  
  • Model Fee Validation: if model fees are used to calculate net composite returns, ensure that net returns using model fees remain lower than they would be if actual fees were used
    
    • Compare actual fee schedules against model fees, if used, to confirm net returns using model fees remain lower than they would be if actual fees were used
    • If some account fee schedules exceed the model fee, calculate an effective composite fee rate
  • Fee Source Validation: if using model fees to calculate net returns, check fees with sources to confirm no changes are needed
    
    • Check pooled fund/mutual fund annual or semi-annual reports for management fee changes
    • Confirm with Product/Marketing teams that strategy fees haven't changed
    • If applicable, review all product types included in the composite. Different product management fees should be considered as different products have different fee schedules.
    • The fourth quarter is ideal for reviewing GIPS Compliance and preparing updates to your GIPS Reports. Suggested tasks to complete for this review are listed below. To avoid the December crunch, it’s best to stagger these tasks throughout the quarter.‍
• If using Actual Fees: When using actual fees, it is important to comply with the 2022 SEC Marketing Rule‍
  
  • Effective Fee Validation: Check to make sure make sure the effective fee is not materially lower than what is regularly being offered to prospective clients, due to
    
    • Fee increases relative to what was charged historically, or
    • Shift to accepting smaller wealth management accounts from a history mostly made up of significantly larger institutional accounts paying smaller fee percentages

2. GIPS Report Disclosures: Get a thoughtful jump on disclosures and pull out the GIPS Disclosure checklist before year-end. When it’s busier in January, your GIPS Reports are ready for calendar year updates to the performance table.

• Review and update, as needed:
  
  • Firm definition (if any business changes during the year)
  • Composite name/description
  • Calculation methodology changes (i.e. system updates, return calculations)
  • Benchmarks
  • Management fee schedules
  • Note any significant events affecting report interpretation
  • Remove expired sunset disclosures

3. Policies & Procedures (P&P) Manual: The GIPS P&P can be long, which makes it hard to get started on an annual review. Keeping it current has benefits for everyone at the firm, and not just because most manuals include a year-end review action item. Many of the policies flow through to the disclosures, and proactive fall updates can catch errors due to changes in systems and roles before the documents are distributed. 6 ideas for making the review more accessible:

• Update policies reflecting current-year changes, if any
• Update GIPS Committee membership, if any
• Verify input data accuracy (valuations, calculation methodology, benchmarks, fees)
• Confirm current valuation policy(ies) matches what is in the document
• Confirm procedures match current practices
• Update audit log/version control

4. List Maintenance: Collaborating with Product/Marketing is important so that composite lists reflect the current state of a firms’ strategies and marketing efforts.

• Marketed Strategies‍
  
  • Review list of marketed strategies/composites with Product/Marketing to ensure accuracy (if applicable)
• Composite Lists, Limited Distribution Pooled Funds (LDPFs), Broad Distribution Pooled Funds (BDPFs)‍
  
  • Update with new/terminated
  • Remove terminated beyond 5-year requirement

5. Benchmark Descriptions: A benchmark review in collaboration with the portfolio management team is important to confirm the appropriateness of benchmarks assigned.‍

• Review and update as needed

6. Verifier Feedback

• Address any outstanding items from your firm’s prior year verification, for example
  
  • Some minor edits were recommended to the Policies and Procedures manual
  • Changes to GIPS Report distribution log were recommended
  • Alignment of composite and benchmark withholding tax treatment recommended
  • Minor changes were recommended to calculation methodology

If you'd like a customizable template to integrate these reviews into your year-end process, please reach out to connect@cascadecompliance.com

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