Key compliance considerations to navigate when promoting private market investments

Let’s face it—compliance and rigorous processes are key when promoting private market investments. If your firm isn’t taking regulatory compliance seriously enough, distribution can come with various types of conduct and reputational risk.

Navigating the regulatory landscape and the associated risks can be complex. Whatever regulated activities you’re undertaking, it’s crucial to embed compliance effectively from the beginning. The stakes are high, and cases — like those involving BlueCrest Capital Management facing a £40.8 million fine for alleged conflict of interest failings that saw investors exposed to harmful risks; and Robinhood being penalised $65 million by the SEC for failing to communicate critical risk information to retail customers — have shown the real-world consequences of non-compliance.

With this in mind, we wanted to discuss some solutions Delio can create within our private markets investment platform to facilitate the compliant and transparent promotion of investment opportunities.

Embedding appropriateness assessments and ensuring robust classifications

Client onboarding is the first touchpoint between investors and platforms powered by Delio. When promoting investment opportunities to certain clients, firms must conduct appropriateness tests to assess whether the client understands the risks involved. These tests are crucial for protecting investors from unsuitable high-risk investments and assessing whether they understand the potential risks involved. Furthermore, investors must be properly classified before they are exposed to investment opportunities. This means making sure that retail clients aren’t mistakenly exposed to higher-risk investments intended for professional investors.

Delio Core’s form builder tool allows firms to conduct appropriateness tests or preliminary suitability assessments systematically, using conditional logic to help assess different investor types based on their real-time responses. This checks that each investor is evaluated fairly and enables tests to adapt to their answers dynamically. These controls are applied while staying mindful of the user experience by adopting an intuitive and easy-to-navigate approach. Furthermore, the Delio Core platform allows the creation of branched workflows to enable the configuration and automation of user journeys based on client types and their jurisdiction of residence. This provides the control and flexibility needed to make sure that investors only see platform documentation that’s relevant and appropriate to their classification and flows can adapt to evolving regulatory requirements.

“Appropriateness testing and client classification are essential for protecting investors and maintaining regulatory compliance.” says Gareth Morgan, Co-Chief Executive at Delio. “We’ve designed our Delio Core platform to streamline this process, making it easier to implement tests that classify investors based on FCA categorisations while delivering an effective digital client experience.”

“By ensuring that client classifications are accurate and workflows are configurable, we are helping firms deliver seamless and compliant onboarding journeys that can evolve alongside changing regulatory requirements.”

Releasing documents at the right time

Sharing appropriate documentation with investors at the right times across the investment lifecycle is vital for compliance. The FCA has made it clear that investors must be provided with the necessary information to make informed decisions. This includes ensuring necessary risk warnings and disclosures are highlighted and completing relevant documents for subscribing to particular investments.

Delio Core’s document management capabilities allow firms to set custom visibility for files at an investor and investment opportunity level so they only become visible when investors reach certain transaction workflow steps. Access can also be granted by receipt of signed agreements which are tracked in digital audit trails.

For example, firms can set permissions for a locked folder so that more comprehensive financial information becomes visible to investors when they have signed a non-disclosure agreement. This not only creates fair and auditable processes to support compliance with FCA regulations but also makes the investment process smoother and more transparent for clients.

“Compliance relies on delivering the correct and clear information at the right moment. Delio Core’s document management capabilities provide firms with precise control over when investors access critical files, using locked folders and transaction workflow document releases that both have custom visibility settings. This assures that sensitive information is only shared once specific conditions are met to embed compliance across the investment lifecycle.” says Gareth.

In conclusion…

Improving your digital client experience while maintaining compliance in a complex regulatory environment is key. From classifying investors correctly and setting appropriate visibility for the promotion of deal flow, to robust appropriateness tests and disclosure considerations. Firms that embrace compliance as a core part of their strategy not only protect their investors and themselves—they position their private market propositions as offerings that their clients and regulators can trust.

We think our client, TritonLake, summarised the importance of this well when asked about how they found working with our private markets investment platform:

“We believe that [Delio Core] is adding, and will add, real value to our relationships and interactions. Our solution with Delio allows our investors to fine-tune their investment preferences and quickly find relevant and compelling opportunities all in one secure and easy-to-use interface. We are also pleased with the workflow and audit trail we have been implementing around opportunity onboarding.”