Definition of Generally Accepted Principles And Practices (GAPP)
Let me tell you directly: the generally accepted principles and practices (GAPP), which you might also know as the Santiago principles, are standardized business procedures for operating sovereign wealth funds (SWFs). These funds have agreed to focus on financial agendas rather than political ones, and they commit to maintaining a stable global financial system.
Understanding Generally Accepted Principles And Practices (GAPP)
You need to understand that the generally accepted principles and practices (GAPP) were agreed upon by the International Working Group of Sovereign Wealth Funds (IWG)—that's 23 countries with SWFs—in October 2008. This came in response to concerns from investors and regulators about the lack of transparency, independence, and governance in the industry. The IWG decided that SWFs must show their setups are proper and that investments are based on economic and financial grounds, not political agendas.
GAPP is built on guiding objectives for SWFs, which are defined as special purpose investment funds or arrangements owned by the general government. These objectives are straightforward: to help maintain a stable global financial system and free flow of capital and investment; to comply with all applicable regulatory and disclosure requirements in the countries where they invest; to invest based on economic and financial risk and return considerations; and to have a transparent and sound governance structure that includes adequate operational controls, risk management, and accountability.
The Framework and Promotion of GAPP
The 24 voluntary Santiago Principles provide a framework for these guiding objectives in three key areas: legal, institutional, and investment and risk. These principles are maintained and promoted by the International Forum of Sovereign Wealth Funds (IFSWF), where members voluntarily endorse them and work to implement them in their governance and investment practices. As of 2021, the forum includes more than 30 sovereign wealth funds from around the world.
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