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This article was provided by Zabrina T Barile and Wendy Toribio-Torres of HedgeOp Compliance, an IMS Group Company (now Cordium).

The Madoff Investment Securities scandal in 2008 prompted significant reforms to the rules and regulations that govern the investment management industry. One of those major reforms includes the Dodd–Frank Wall Street Reform and Consumer Protection Act signed into federal law by President Barack Obama on July 21, 2010. The goal is to increase transparency in the financial system and hold those accountable who do not abide. As the investment management industry continues to evolve and undergo substantial changes, it is clear that there is a need for money managers to build out robust effective infrastructures and conduct thorough due diligence on many levels including investment and risk management, investigative, operational and more.

A number of administrative proceedings, complaints and litigations recently filed have included allegations related to the investment adviser’s due diligence. Asserting proper due diligence could have prevented investments involving Ponzi schemes, insider trading or other serious frauds. Actions have focused on false and misleading statements in the investment adviser’s marketing materials or offering documents based on the level, scope or quality of due diligence. Others have also noted the absence of well-doc......................

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