Financial Industry Regulatory Authority (FINRA) and The Securities and Exchange Commission (SEC) have all made Enterprise Risk Management an exam priority for broker-dealers and other investment institutions.
Specifically in the alternative investments area, they have called out product due diligence and third party risk management as part of a comprehensive third party risk management investigation priority.
In 2014 alone, FINRA has disciplined more than 1,000 companies and individual investment advisors with over $34 million in penalties over failures to meet enterprise risk management and due diligence requirements.
Due diligence firms are a scatter-shot of small firms scrambling to meet with product issuers and broker-dealer clients. Some due diligence firms hired by issuers resist the temptation to write an agreeable report to get paid, however many others routinely rubber-stamp new deals to avoid damaging relationships with product issuers. In these litigious times, organizations of all sizes are required to provide evidence of effective due diligence by questioning who is evaluating an alternative investment deal that could be either a win to investors or result in failure, or even fraud, through their own due diligence processes.
In this area, many are struggling with manual processes, timeliness of outreach, responsiveness of third parties, and concerns of their ability to provide evident of effective due diligence during their FINRA exams.
LogicManager’s Due Diligence and Third Party Risk Solution
To meet these requirements, LogicManager provides a Due Diligence and Third Party Risk Management Plugin to our Enterprise Risk Management platform. LogicManager uniquely combines automation, content, pre-built templates and ERM consulting under one transparent fee, delivered through a Software-as-a-Service subscription. You can be up and running in 5 days with no IT resources needed, and unlimited consulting to upload and retrofit your existing data.
Benefits of the LogicManager’s ERM Solution for Broker-Dealers:
- Automated tasks and workflows collect and categorize data and documentation directly from third parties so it can be automatically sorted, analyzed, and historically tracked.
- Built-in forms, templates and questionnaires provide evidence of the thorough due diligence processes required by FINRA and the SEC.
- Due diligence tools are built into third party profiles for fast and easy cross checking to uncover fraud or misstatements.
- Built-in reports measure and manage third-party risk, while providing evidence to ensure compliance, by connecting third-party assessments and documentation in support of organizational policies and regulations.
- A centralized approach to corporate governance, conflicts of interest, security and enterprise risk management enables seamless collaboration to streamline engagement of business area time and resources.
- A library of risks and automated templates provides a framework for effective risk management.
For more information, download our overview of LogicManager’s Due Diligence and Third Party Risk Management Solution or request a demonstration.