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Message: Just noticed this on my Fidelity account.
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Is GMI a significant governance board?

It is not. It is an independant company. Here is what I found.

http://www3.gmiratings.com/home/

http://research2.fidelity.com/fidelity/research/reports/release2/ResearchFirmDetails.asp?page=GMI.asp

About the Firm

GMI is an independent risk research firm that provides a statistically modeled assessment of corporate integrity. Founded in 2002 in direct response to the growing number of scandals, lawsuits, and investor losses resulting from fraudulent corporate behavior, the firm identifies potentially high-risk company accounting and governance activity that has been historically correlated to stock price declines, securities class-action litigation, and material financial restatements.

The product of GMI's analysis is a unique risk measure called the AGR® Score. This measure can be used by investors as a way to more effectively manage corporate risk.

Methodology

The firm uses a proprietary methodology that integrates extensive public data channels and advanced statistical modeling techniques to provide deep insight into a company's financial disclosure and governance practices and to expose associated risks. It operates several quantitative models that provide risk ratings. Extensive academic and third-party research has validated the Accounting and Governance Risk (AGR) Score as an effective and independent variable in determining investment returns.

Coverage

GMI forensically analyzes the financial reporting and governance practices of more than 8,500 North American-based publicly traded companies spanning all market capitalizations and industries.

Companies are required to have financial statements filed with the SEC for at least five quarters, including the current quarter in order to have an AGR rating calculated. Publicly traded companies with inactive ratings are classified as Delinquent Filers (no current SEC filings available) or Rating Pending (SEC filing available, but missing or problematic data preventing calculation of AGR.)

What's Provided on Fidelity.com

Risk Ratings, Reports & Screen Criteria

  • Accounting and Governance Risk (AGR®) Ratings: GMI's flagship Accounting and Governance Risk (AGR) Score is widely recognized as a confidence level indicator for the company's management and reported financials. Scores range from 0 to 100, which correspond to a risk rating for each company ranging from "Very Aggressive" to "Conservative." Effectively, all companies start with a perfect score of 100, and get points deducted for every failed accounting and governance test. The AGR tests have been designed based on an extensive statistical review of SEC fraud cases - i.e., they have been found to be predictive of fraud or financial manipulation.

    Through continued back-testing, GMI has demonstrated a strong correlation between its quarterly AGR ratings and the likelihood of adverse events, including securities class action litigation, financial restatements, regulatory enforcement actions and stock price declines. AGR ratings can help investors looking to manage risk or enhance investment performance. In fact, companies that have a "Very Aggressive" AGR have a higher risk probability of facing negative events when compared to "Conservative" rated companies.

    Companies rated "Very Aggressive" under AGR have historically been:

    • 10 times more likely to face SEC enforcement actions
    • 6 times more likely to delay financial reporting
    • 5 times more likely to face securities litigation
    • 4 times more likely to file for bankruptcy
    • 2 times more likely to deal with executive officer change
  • AGR Equity Risk Factor: Extensive internal and third-party research demonstrates a distinct correlation between AGR Ratings and a variety of high-risk events. The Equity Risk Factor is derived from the AGR Score and provides a leading indication of share price performance. It ranks companies from 1 to 5 (worst to best) and observes a consistent and pronounced spread in annual returns between high risk and low risk companies.
  • In-Depth Company Reports: GMI provides comprehensive reports on 8,500+ North American-based publicly traded companies. Reports include in-depth risk analysis of each company's financial reporting and governance practices, and examine risk metrics in five broad categories: Revenue Recognition, Expense Recognition, Asset-Liability Valuation, High-Risk Events and Corporate Governance. A company's risk profile is based on a statistical comparison of its current risk metrics with those of peer companies and prior reporting periods. AGR Scores and Ratings are updated quarterly after financial statements are filed. The reports are updated if applicable with AGR Watch or recent "high risk" events that could potentially have a negative impact on the next quarter AGR Score.
  • Advance Search Criteria: AGR Score and AGR Equity Risk Factor allow you to screen companies for "Conservative" to "Very Aggressive" corporate behavior and lowest to highest expected return as a result of their accounting and governance practices.
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