For decades, US investment managers have relied on a combination of manual processes and extensive use of Excel spreadsheets to conduct initial and ongoing due diligence on outsourced activities. Despite regulatory pressures and evolving market practices that demand more sophisticated systems, many managers continue to handle due diligence manually. It’s time to address the proverbial elephant in the room: Do investment managers need to evolve or modernize their due diligence processes now?
In 2022, the SEC proposed rules on overseeing outsourced activities and importantly focused on “Covered Functions”. This highlighted areas where the SEC believes expanded oversight is needed for vendors. These Covered Functions encompass the core activities that managers typically outsource. The proposed rules suggest a comprehensive overhaul of the current due diligence framework, pushing managers towards a more structured approach. Although the rules have not been finalized, the momentum and regulatory signals suggest they will be enacted soon, mandating robust, auditable, documented, and reportable procedures for all aspects of vendors’ services.
European regulators have long established stringent due diligence requirements. US managers, especially those with European operations, are familiar with these rigorous standards. While the US does not always mirror Europe’s regulatory environment, there’s a growing trend toward adopting similar vendor due diligence practices. Enhanced oversight is universally recognized for mitigating risk, and this shift is gaining traction in the US market.
Combining the US regulatory movement with European standards, the future of due diligence is clear: increased oversight, more structured processes, and a comprehensive due diligence framework are essential. Investment managers must adapt to these changes to stay compliant and minimize risks effectively.
Zeidler Due Diligence (ZDD) —a game-changer for investment managers. Our innovative, web-based platform transforms the entire due diligence process, allowing managers to streamline and centralize vendor due diligence management.
ZDD is more than just a due diligence tool; it is a one-stop solution for managing all vendor due diligence processes. It ensures compliance with upcoming SEC rules as well as European rules including CP86 and CSSF Circular 18/698 and ultimately prepares investment managers to future-proof their operations.
As regulatory expectations tighten and the demand for robust due diligence increases, Zeidler Due Diligence (ZDD) emerges as the essential tool for investment managers. ZDD simplifies due diligence processes, enhances compliance, and provides the structured framework needed to meet future challenges.
Don’t wait until new regulations catch up with you—embrace ZDD today to stay ahead in the evolving landscape of investment management.
Ready to revolutionize your due diligence process? Book a demo of ZDD now and see how it can transform your compliance and oversight procedures.
If you have any questions or require support, the Zeidler’s Due Diligence, Legal, and Regulatory Team are here to assist. Our global team of professionals stays current on the latest legal, regulatory, and compliance changes affecting the asset management industry. For additional information or assistance, please get in touch with us.
