Unwinding the Complicated & Conflicted Compliance Conundrum

The regulators are after still after you.  Whether your business is being beat up by FINRA regulations, the Basel III  Accord or some other regulatory body, the desired impact is all the same – the regulators are here.  They are tired of dealing with the investment fraud complaints, the lack of reporting transparency that allows investment fraud to thrive, and they are going to take a pound of flesh.

While we are proud of the launch of our real-time underwriting program we call the RTU System (Real-Time Underwriting) for commercial real estate finance equity and debt securities placements, one of the interesting side benefits of the underwriting program is that we can use it as part of a real-time due diligence compliance program that provides the additional benefit of also providing up to 24 months of advance notice of potential default event issues such as competition-driven asset obsolescence and provide proactive investment fraud event mitigation.

Maybe $50 a month per seat is a lot of money to your firm and maybe it is not.  The point is the regulators have taken the position that retroactive mitigation for loss severity risk management is no longer going to be sufficient to cut the mustard.  If you are serious about preventing loan and investment loss exposure for your institution or brokerage, then you have to get serious about ongoing due diligence.  The regulations are intentionally vague as to what will suffice.  The practical outcome of this evolving regulatory oversight regime is that only a complete underwriting review and due diligence review will suffice to satisfy the regulators:

  • That means a valuation analysis has to be done and they can take that to the extreme and that means at least quarterly if not monthly; and
  • That means a full, complete and tested feasibility study has to be done and that can also be taken to the extreme of being a monthly obligation; and
  • That means full capacity underwriting has to be conducted and has to be done on at least a quarterly basis if not monthly; and
  • That means full collateral underwriting has to be conducted and has to be done on the same basis as capacity underwriting; and
  • That means full credit underwriting has to be conducted and you have to demonstrate that loss severity risk is not going to be an issue if the promoter/sponsor/borrower is removed from the execution risk management loss exposure calculation; and
  • That means a full due diligence underwriting review has to be undertaken at the same time as the credit underwriting review takes place; and
  • That means that fraud certification has to be obtained every month to minimize exposure on all levels of the enterprise.

Obviously, legacy systems are not up to this task.  The cost is prohibitive and by the time these requirements are fulfilled the market has changed, so the resulting report may have no real value.  The INVIZEN Real-Time Status (RTS) program is designed to tackle all of these issues and do so cost-effectively.  Take a minute and find out how to unwind your compliance, loss exposure and regulatory compliance exposure all at once and be done with it.

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