Investing Opportunity Due Diligence Checklist

 

 © Marcus : Soyke-Matthews www.InvestfortheBest.co.uk

Purpose and How to use: This checklist is designed for the questions to be researched/asked and answered as far as possible to assist in assessing an investment opportunity and balancing possible over-enthusiasm based on marketing material or tempting high returns. It does NOT require every question to be answered in the positive, as they may be valid reasons for a less than simple answer. However a non-response in itself should be considered as possibly raising a question. Rather it is to provide the fullest possible information available in order to make an informed risk assessment. Very high returns are possible in the market, which should be balanced with spreading risk across investments or profit opportunities. If sending to the opportunity then DELETE this initial paragraph and  centre column first.

Organisation Name:

Completed By (CAPS):                                            Signed:                                    Position:                        Date:

Questions:

 

  • What is the organisation’s full name, address [not PO Box], and telephone number and email? Please confirm whether organisation employees or members are physically present and contactable by personal visit at this address (and if not why not.)
Some contact method of real existence. Many offers miss this information. Scams often cannot give out a number that you can call as it gives away their location elsewhere. Verify a real physical base. One company had nice office pictures on their website but was not listed in the German yellow pages as residing there and reception did not know of them. Phone number was a UK only one with no German alternative.
  • Under which legal structure are the investment funds held? If different from above please clarify.
It should be clear exactly which entity you are contracting with and where funds are held. A recent UK fraud used an almost identical company name with no connection. Client Funds should be evidenced as ring fenced.
  • How long has the organisation been operational in its current from?
New organisations are higher risk or a possible re-birth of a different business closed down by regulators. Eg TIRN was reborn as PMO
  • Have any of the directors or traders or their company been disqualified, disbarred from professional organisations or regulatory authorities in any way? If yes please provide explanation.
Non compliance with ‘authorities’ may not be essential for those with privacy knowledge but is often a ‘red flag’.
  • Are company documents (if relevant) up to date? Please supply the last 3 years financial statements and audit report or explain why they are not available. Please advise how this can be verified.
Late filing may indicate poor management and lack of professionalism or issues with the underlying funds. Audit reports and accounts will show the size of the operation and other useful information.
  • What is the investment track record? Please supply back up.
Longer is better generally (though many funds have a 3 year track record then crash, so  the last 6-12 months may more important)
  • Who are accountants/auditors and their contact details? Is there any information regarding their appointment, their relationship, their ownership of shares or other any benefit in kind that could be considered as affecting their impartiality? If so please detail
Recent frauds have had small firms with personal connections for many years who have thus not been properly independent or qualified.
  • What is the money and risk management strategy (eg maximum risk, maximum allocation per trade)? What system and software is used to record trades, manage the risk and calculate performance returns and fees?
There should be a published strategy on risk and money management to avoid blow-ups like LTCM and Amaranth for example
  • Please supply the CVs of the Key directors and key traders.
CV history can be checked for accuracy, references taken up.
  • Does the operation require have any regulatory approval or membership in any country it is operating or marketing?  Can this be verified? For example in the UK is the scheme registered by the FSA or if not how is marketed in compliance with the requirements?
Several boiler room companies use similar names or even copy registered numbers eg Morgan Soloman sound like Morgan Guarantee and Salomon brothers but is a boiler room set-up. Templeton Capital Wealth Management sounds like Franklin Templeton Investment Management and was apparently falsely claiming their FSA registration number. It may be that under privacy advanced information, the authority has no jurisdiction. Regulation is a cost to a fund and private opportunities may decide not to be regulated by the ‘system’ and this is feasible under private arrangements
  • Please explain the basic details of the investing strategy/ies and supply 3 example trades/investments for each investment product offered showing investment instrument, broker, amount, entry, exit, % risk, risk control method.
Any investment method should be explainable and verifiable to the intelligent layman. Eg in one opportunity of “MTN Notes” –the company could not explain how they made 30% profit per day nor would they show example past trades. Audit trails can of course be falsified if there is collusion.
  • Which brokers are used and what is the country where they hold the trade funds? How are the investment funds allocated across different brokers?
Brokers can and do go bust (4 in the last 3 years). Funds should be spread across brokers. The country location is relevant for tax, currency and demonetisation risk.
  • Please supply a sample form/contract
Check the validity of the contracts. If the legalise does not make sense –ask.
  • Please explain any referral or commission structure and supply a copy of the agency or distributor agreement or if there is not one explain why.
Investors should be aware of the amount of any commission paid for transparency and impact on returns.
  • In a loss situation how does the payment of commissions impact the net repayment to the investor? Are commissions clawed back?
As above
  • Is there a receipt for deposited funds? How can fund performance be tracked and verified?
Ideally there is a sound internal control process, and verifiable statements eg annual audit report
  • What is the bank mandate for payments out from the account investors pay funds into? Ie what range of account can funds be transferred to and how many signatories are required? Are there any restrictions as to where funds can be transferred from the broker account?
Single or related party dual signatories is a risk for fraudulent diversion of funds. Controls should prevent diversion of funds at any stage.
  • What proof can you supply that returns/withdrawals are not paid out from existing or new investor’s capital?
Investors having successfully withdrawn funds does not prove positive returns. (qv Madoff fraud). Audited accounts and track record with bank and broker bank reconciliation should be available on request.
  • Do you check or inquire as to suitability in investing in terms of investor risk profile and amount of risk capital?
Acceptance of your funds without any check as to your risk profile or suitability is a red flag. While the investor’s responsibility, genuine fund managers will have an interest in the investors not taking excessive risk in their opportunity.

 

To download the above as the Word document (doc file), click here:

DueDiligenceRequestChecklist_I4TB

For an investment opportunity check http://www.seriousbusinessopportunity.co.uk, which is probably the best business opportunity, or contact Marcus : Soyke-Matthews at www.InvestfortheBest.co.uk for investments related to Gold, Silver and commodity markets – mention my name (Kamil) for a special treatment 😉

To our success

Kamil

 

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