March 5, 2019
Best Practices for Meeting the Distribution Requirement
Global Investment Performance Standards (GIPS®) Provision 0.A.9. requires firms to make every reasonable effort to provide a compliant presentation to all prospective clients. Firms must not choose to whom they present a compliant presentation. As long as a prospective client has received a compliant presentation within the previous 12 months, the firm has met this requirement.
The GIPS standards defines a prospective client as any person or entity that has expressed interest in one of the firm’s composite strategies and qualifies to invest in the composite. If an existing client has expressed interest in a strategy different from their current one, then they would also qualify as a prospective client. If a consultant represents investors that qualify as prospective clients, then the consultant is considered a prospective client and must receive a compliant presentation.
Before a person or entity is a prospective client, they are considered an interested party. An interested party is any person or entity that has expressed interest in learning about the asset manager but has not expressed interest in a specific composite strategy. As described in the GIPS standards, an interested party becomes a prospective client when the following two tests are met:
When an interested party becomes a prospective client, firms must make every reasonable effort to provide a compliant presentation in a timely manner.
If a prospect remains a prospect for more than one year, then the firm must provide an updated compliant presentation at least once every 12 months and must do so for as long as the prospective client remains a prospective client.
As a best practice, firms should establish policies and procedures for:
Posting compliant presentations on the firm’s website and directing a prospective client to obtain the compliant presentation from the website does not meet the compliant presentation distribution requirement. Distribution may be done electronically through email or as a hard copy.