When your team is working through the due diligence process, it can be time-consuming. The internet can feel like a godsend, a place where you can access a great deal of information in one fell swoop and cut down on the time required to research and complete processes.
While you can find a great deal of information online to educate yourself in the due diligence process, you also need to take some very specific steps to ensure you’re covering all your bases.
Print, print, print.
When you find information online during your due diligence research, don’t just bookmark the page or link the URL.
Even though it’s time-consuming (and paper-consuming), take a minute to print out the page. Because web content can change frequently, you need to have verifiable evidence of the page in the same state as it was at the time you made your decision.
Document your decision-making.
Printing is important, but just a printed copy of a webpage won’t be enough to satisfy auditors when they begin to question your due diligence processes. When the SEC conducts an audit, they will want to know why a significant position was taken regarding a specific issue on a specific date.
Although historical data can be obtained by a simple internet search, it does not evidence that the research was conducted on the date in question. Take time to document why the information you researched online had an impact on your decision making, so you can feel confident and not have to rely on memory or on reconstructing conversations and email chains.
Trust, but verify.
You can find a lot of information online, but it’s always a good idea to complete other fact-finding processes in order to confirm what you see online is true and is not outdated.
In addition to the typical internet research, pick up the phone, and try to verify the information found online. Document and date your findings from your phone research as well.
If you’re doing due diligence research for private securities, it can also be a good idea to schedule an onsite visit (or virtual if necessary during the pandemic) with the underwriter and their service providers.
Conduct Thorough Research Regardless of the Product.
Some products look or feel riskier than others. However, appearances can be deceiving, and just because something looks like a safe bet or a sure thing, that doesn’t mean it’s actually a great deal for you or for your clients.
As an example, many people assume bonds are safe because of the structure of the product. However, bonds come with their own level of risk; see this article found on the SEC’s website. When selecting bonds for investment, for example, it is just as important to conduct thorough due diligence on the bonds being considered as it is any equity or private security.
Regulators are highly committed to the wellbeing of consumers, and they do check to ensure financial service providers conduct due diligence before making recommendations or purchasing products for clients. By taking the right due diligence steps when you initially make decisions regarding a product and by thoroughly documenting your processes, you’ll be able to streamline the audit process and feel more confident the next time your regulators visit.
About Red Oak Compliance Solutions
Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry, serving clients with more than $19 trillion in assets under management. Red Oak’s advertising compliance review software offers quick implementation timelines, as well as agile technology that responds to client needs and is 100% Books and Records compliant. Our clients report 35% faster approvals and 70% fewer touches, with many experiencing even better results. Are you ready to minimize risk, reduce costs, and improve efficiency? Contact the Red Oak team to learn how.
About Red Oak Compliance Solutions
Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry. It is a comprehensive suite of SEC 17A-4 compliant features that are 100% books and records compliant and provides clients with 35% faster approvals and 70% fewer touches or better. We also offer Smart Review(SM), which solves for the storage and maintenance of disclosures, helping firms reduce risk, decrease review times, and increase the speed of distribution of marketing materials. Smart Registration(SM) automates the licensing and registration management process to help reduce regulatory risk and time spent on manual processes. Overall, Red Oak allows firms to minimize risk, reduce costs, and increase compliance review process effectiveness and efficiencies.