How to do due diligence on sexual misconduct at a new or existing fund manager

Posted by Andrew Borowiec on Jul 19, 2018 7:00:00 AM

sexual-misconduct-at-a-new-or-existing-fund-manager Recently Bloomberg reporter Simone Foxman interviewed Dan Schorr and Monica Monticello from Kroll’s Sexual Misconduct Investigations practice for the IMDDA. They outlined how to perform due diligence on sexual misconduct issues and we have some of the highlights for you here.

1. Create a framework to work to

  • Establish what your organization’s risk appetite and tolerance are for these issues.
  • Plan out what you’ll do in the case of different kinds of findings, for example whether you’ll take them back to the fund manager for further clarification, whether they automatically rule out the investment etc.
  • Decide if you are looking to do a general review of the fund manager in question or if you’ll just look at red flags.

2. Mine public records thoroughly

  • Look at federal, state and county litigation records, both at a company and individual level. EOC (Equal Opportunities Commission) lawsuits are a good source, but look at other things like wrongful dismissal suits, divorce proceedings and any other instances that might refer to #metoo issues.
  • Review all media surrounding the fund manager, its execs and those employees involved most closely with the investment. With individuals, look at news from past posts as well as current. Don’t forget to read comments left on online content as well as the main article.
  • Go deep on social media, try and get beyond the professional veneer an individual presents and see whether that is consistent with how they represent themselves on more personal platforms.

3. Look at policies and procedures

  • Ask to review all HR policies relating to employee rights, protections etc. This will avoid you having to call out the sensitive issues of sexual harassment directly in early conversations, before a rapport has been built.
  • Isolate the sections relating to sexual harassment and misconduct, then review them as you would any other set of policy and procedure documents you’d receive during a due diligence investigation, looking for a serious commitment to preventing sexual misconduct and a robust process for dealing with issues as they arise.
  • Make sure they are comprehensive and allow for easy reporting i.e. there’s someone outside the management structure who the reports can go to, that they are anonymous etc.
  • Ensure that the victim is protected from any reprisals. This is even more important than the checks you do on protection for whistleblowers in other areas, as the victims of harassment and other forms of misconduct are especially vulnerable.

4. Talk to people

  • Talk to employees, making sure they understand and are familiar with all the policies and procedures you reviewed in step 3. Ask more general questions around climate and culture. For the sake of the relationship with the fund manager, you should alert them that you’re planning to do this.
  • Ask former employees about the culture and their experiences during the term of their employment.
  • Where possible, talk to those involved in any relevant litigation to get detail beyond that available in the public record.

As you see, the basic process is very similar to how you’d conduct your due diligence investigations in other areas, it’s just the nature of the investigation at each step is different. We look at different records at both a public and company level, we ask different questions at interview, but the fundamentals remain the same which should reassure due diligence professionals doing this for the first time.

For more detail on this critical new area of due diligence, watch the full webinar video recording here or download the full survey report on sexual harassment below. 

Download IMDDA's Sexual Harassment and Due Diligence Survey Report
Image from Freepik 

Tags: Policies and Procedures, Due Diligence

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