Skip to content

FRM Part II · FRM Exam Part II · Performing Due Diligence on Specific Managers and Funds

During background checks on a fund manager, a due diligence analyst finds that the manager's CV lists a master's degree that the university cannot confirm and omits a two-year gap in employment. What is the most appropriate response?

The analyst should treat it as a potential integrity problem, verify independently with the university and prior employers, and escalate before investing. Strong returns or a signed representation from the manager do not substitute for independent verification of background facts.

  1. ARely on the manager's explanation, since track record matters more than credentials
  2. BTreat it as an integrity issue, independently verify with the institution and former employers, and escalate before proceedingCorrect
  3. CAccept the discrepancy provided the fund's returns have been strong
  4. DAsk the manager to sign a representation letter and take no further action

Explanation

Misstatements about credentials and unexplained gaps bear on integrity, which is a core non-investment criterion. They require independent verification via primary sources and escalation, not reliance on the manager's own assurances or on returns.

Did you get it right without looking?

One question tells you little. A timed set on Performing Due Diligence on Specific Managers and Funds shows your real accuracy, how long you take and where you lose marks.

Practise Performing Due Diligence on Specific Managers and FundsFree diagnostic mock

More Performing Due Diligence on Specific Managers and Funds questions