Independent financial adviser workshop

65 Pages·2013·0.67 MB·English

FAIS Sup ervision
IFAs Workshop

2013
DUE DILIGENCE
Due Diligence

Quote: “It is not that I
did not tell you the truth.
It is just that you did
not ask the right questions.”

Make sure you ask the right questions!
Source of all cartoons: Personal Finance
Due Diligence

AIMS: protecting your clients
protecting your business and
reputation

Learn from industry history where things have
gone wrong in the past:

• What mistakes have
other investors made?
• What should they have
done differently?
Due Diligence

Broad Risk Areas:

• Poor performance
• Risk/volatility not in
line with expectations
• Operational failure
• Financial failure
• Regulatory non-compliance
• Fraud
A thorough due diligence investigation
needs to cover a number of key areas:

• Regulatory compliance
• Governance structures
• Financial soundness
• Operational reliability
• Investment management
Someone in your organisation should be responsible
for ongoing due diligence – results should be
communicated to all financial advisors in a summary.

Due diligence data must be updated and reviewed
regularly.

Due diligence should be carried out consistently over
all products under consideration.
Due diligence summary should be shown to clients
prior to an investment being made – minute in the
Record of Advice.

Records must be kept and produced should the need
arise.

The due diligence investigation should cover:

•product(s)
•asset manager
•product provider
Regulatory Compliance

• What is the legal structure of the investment
product?
• Who is the product provider?
• Who is the asset manager?
• What legislation covers the provision of the
investment product?
• What oversight is the
product or product
provider subject to?
Regulatory Compliance
• Does the manager/product
provider have the correct FAIS license?
• Has the FSB website been checked to
ensure that the manager/provider is
licensed for the service being provided?
e.g. Relative Value Arbitrage
Fund/Herman Pretorius
• Is the FSB website checked regularly for
license suspensions/withdrawals?
e.g. Trilinear