We have spoken at length in the past about various forms of funding and investment in business and the importance of the availability of funding for all businesses in particular small and medium enterprises who may rely on outside funding. Something which is rarely touched upon is the importance of choosing the right investor for your business, and one which can go the distance alongside your company. Failure to choose a sustainable investor can cause serious problems for both your business and the investor.
This issue is especially important this week as it was revealed that many Irish investment firms have been found to have failed to meet the required standard of investors by the Central Bank of Ireland. The bank recently conducted a review of suitability requirements for investment firms and found many companies to be sorely lacking, which is not encouraging news for business owners wishing to secure funding. Michael Hodson, Director of Asset Management has been quoted as saying of the findings:
“The review highlighted that firms need to improve the quality of information collected and how this information is utilised in the suitability process. With the introduction of higher suitability standards, the quality of the information collected is all the more significant. Boards are reminded that they are responsible for implementing an appropriate governance framework that meets the suitability regulatory requirements and embeds a client-centric culture across the firm. Investor protection is at the core of the Central Bank’s mandate.”
The review found that many firms were unable to demonstrate that the required suitability policies and procedures were implicated whilst also pointing out that many application forms were incomplete. Some firms were also found to be reliant on self-assessment alone and had little to no tools in place for assessing suitability for investment, relying heavily on technology. In perhaps the most worrying finding, many companies were found to have nothing in place for dealing with potentially vulnerable clients and companies.
Thankfully, the Central Bank assure companies that in any areas that the findings may be damaging to consumers formal supervisory requirements have been implemented which should reduce risk greatly for prospective clients.
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