Episode 67: Due Diligence of Investments

Sr. Compliance Consultant Kurt Nuñez joins us to discuss the Due Diligence of Investments on episode 67 of the CCO Buzz. 

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CCO Buzz: Hello and welcome back to the CCO Buzz! On this episode, Kurt Nuñez joins us to discuss the due diligence of investments.

In a previous CCO Buzz episode, we discussed vendor due diligence. Are there any other types of due diligence requirements?

Kurt Nueñz: Yes, there is a very important due diligence requirement that advisors should consider and that’s due diligence of investments.

CCO Buzz: Investment advisers are required to perform due diligence on the investments they recommend?

Kurt: Absolutely, it’s a very important fiduciary requirement.


CCO Buzz: What are advisers required to do regarding due diligence of investments?

Kurt: Well, as fiduciaries, advisors are required to act in the best interest of their clients. This includes having a system or methodology for recommending or not recommending a particular investment and documenting that review.


CCO Buzz: How would an advisor go about performing due diligence on a particular investment?


Kurt: Well, the extent of the investigation will vary greatly depending on the type of investment. For example, investigating an individual stock can involve documenting the advisor’s screening criteria and documenting how a particular stock meets that criteria. The recommendation of a Private Fund would require a more thorough investigation involving a review of management, financials, [and/or] underlying strategies, for example.


CCO Buzz: Are there any other best practices around due diligence of investments?

Kurt: Yes, I often recommend, not only documenting the investments that you are recommending, but also those that you may reject for recommendation to your clients. This documentation can go a long way in demonstrating your selection process as opposed to reflecting simple investment cheerleading.


CCO Buzz: Do you have any other recommendations?

Kurt: Yes, it’s very important to create policies and procedures around performing investment due diligence and include these policies in your Policies and Procedures Manual.


CCO Buzz: Any last thoughts Kurt?

Kurt: Sure, creating policies and procedures around due diligence of investments can seem like a daunting process if you don’t have the pre-requisite experience. Core Compliance & Legal Services can provide assistance if needed. Firm‘s can contact us for assistance by calling our main office at (619) 278-0020.


CCO Buzz: Well that’s it for this week’s episode. If you’d like additional information, please check out our website at www.corecls.com. You can also follow us on Facebook, LinkedIn, or Twitter @CoreCls. Thank you, and we hope you tune-in to next week’s episode of the CCO Buzz.


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