A related party is an accounting concept that refers to an entity that is not independent of the company. Examples of related parties include both the CEO’s family and any subsidiaries or equity investees. Related party transactions are not arm's-length, which means participating entities do not always charge market rates. Affiliate transactions can also create opportunities for fraud, as described in our Red Flag Guide.
Hudson Labs uses proprietary AI models to identify higher risk related party transactions and assess the concentration of related party risk across U.S. issuers. The use of language models means we can identify related party transactions, regardless of the wording or key words and assess relative severity, facilitating advanced due diligence and market monitoring.
Coverage universe: U.S. issuers filing a 10-K or 10-Q
Coverage initiation date: Jan 1, 2019
Screen for companies with concentrated related party risk
Find the related party risk screen on the "Ideas" page of the Hudson Labs platform.
Screen inclusion criteria: Concentrated related party risk as assessed over the most recent four quarters. Where a company has not filed at least four quarterly filings, we extrapolate.
“Concentrated risk” is assessed by Hudson Labs AI. The model is assessing risk based on the density/frequency of related party disclosure, the existence of specifics/numbers and the existence of high risk accounts (revenue, accounts receivable etc), among other items. This assessment is approximate.
Data dictionary:
Important note: Screens include 10-K disclosure only. Visit the company page for a more comprehensive view of related party disclosure across multiple filings.
Company page - Related party view
Find company-specific related party risk details on the "Red flags" section of the relevant company page of the Hudson Labs platform. All related party disclosure will be displayed here, including for companies where the risk has not been assessed as “concentrated”.
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