Welcome to the award-winning FCPA Compliance Report, the most senior podcast in compliance. In this episode, I conclude a 2-part series on FTX and risk. I am joined by Gilbert Paiz and Andrew Gay, principals in the Texas Hill Country Advisors. In our previous Part 1, we considered risk and risk management through the lens of US-domiciled financial institutions and how their risk management protocols help assess risk and manage it throughout the life cycle of a banking-customer relationship. In this Part 2, we consider individual risk in investing and what type of background information, questions, and due diligence individuals should engage in and how these questions and background investigations apply equally to larger investments made by sophisticated investors, hedge funds, and institutional investors; who should have made them before investing in FTX but they all failed to do so.
Some of the highlights include:
· What due diligence should an individual perform?
· What should an individual look for in a financial statement?
· Why is the physical location of businesses and where it might be incorporated such an important piece of information?
· What are backstops, guarantees, or other mechanisms to retrieve investments?
· What Due Diligence mistakes did you see in FTX?
· What are related party transactions, and why are they problematic?
· Why are audited financials critical?
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