Reasonable Due Diligence Includes Monitoring Ongoing Financial Performance

Wednesday, May 28th, 2014 and is filed under AI Insight News

Broker Dealers are finding the Regulatory focus and the need to provide documentation increasingly demanding – particularly when it comes to offering complex products to their clients. As new regulations are released, a trend toward a fiduciary standard for broker dealers and their advisors appears to be emerging.

One such Regulatory Notice is Notice 13-31 pertaining to suitability and due diligence, which was released by FINRA in September 2013. This NTM provides some effective practices for broker dealers as it relates to requirement to “have a ‘reasonable basis’ to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable due diligence of the member” as set forth in FINRA rule 2111 effective October 7, 2011.

What constitutes reasonable due diligence? It may come as no surprise that a clear definition is not provided. We can safely assume complex products require more due diligence. Complex products, such as non-traded REITs and BDCs, can evolve from quarter to quarter. Keeping advisors up-to-date on an offering’s management, assets, and performance is essential to staying compliant under the suitability rule.

Most independent broker dealers find the task of compiling the necessary information for on-going due diligence for the life of each program on their platform daunting. As regulators enforce the compliance requirements, broker dealers are looking for ways to increase research tools accessible to advisors to help promote their own “due diligence” and improve the efficiencies of “comprehensive due diligence processes”.

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The AI Insight platform offers Enhanced Financial Performance reporting that provides ongoing, unbiased financial performance updates – both during and after the offering period. This premium feature covers public non-traded REITS and non-traded BDCs.

Our reporting system allows advisors to search a program’s financial performance data based on criteria such as sector, structure and offering status. Each program’s Financial Performance Summary compiles information from quarterly and annual reports and presents it in a single, easy to read report – saving subscribers significant time and effort. Key performance metric ratios are readily available to help guide advisors in their on-going research and education of complex products offered through your firm.

AI Insight’s Enhanced Financial Performance reporting allows subscribers to stay informed with easy access to the performance data they need – all through a system they already know. For more information, call us today at 877.794.9448 or email to find out how you can access the power of Enhanced Financial Performance reporting from AI Insight.