Trading Guidelines For Private Placement Programs

1. Few of the rules applicable to other businesses apply to private placement programs. You success has little to do with what you know and just about everything to do with whom you know.
2. It is a privilege to be invited to participate in a private placement program, not a right. Traders can easily maintain a constant supply of previous clients and new applicants because of the high yields and negligible risk. If the trader does not receive a complete compliance package, he will simply say….next!
3. Failure to disclose fully can disqualify the most earnest of applicants. And the traders have no obligation to explain to you or your client. You should never, ever underestimate what the traders know or can find out about the investor and the intermediaries’ prior efforts to get into the business. They will know if the client has been shopped around.
4. Most of these private placement programs exist in order to finance humanitarian projects. Yes, they are lucrative to investors, but the purpose is not simply to generate more money for the already rich, but rather to encourage the re-circulation of idle money and place the funds where they can help the most. Clients with their own projects, and clients willing to support
projects sponsored by the trading groups always move up in priority and get the better yields.
5. Remember to let your client know that they need to prove their qualifications to the trading groups running the private placement programs not the other way around. Compliance officers and traders will not go back and forth with intermediaries and/or clients until after they have received a complete compliance package consisting of a passport copy, CIS (client information sheet) and proof of funds (POF), which can be sanitized to protect sensitive info.
6. A personal interview is usually required with the principal even when the principal has given a POA (power of atorney) to a mandate. Traders must know with whom they are dealing. Many people do not get past the interview stage, because of unrealistic demands or attempts to negotiate terms that have already been fixed by regulators and banks. And from personal experience I can tell you that language barriers can be a big pitfall. As I write this, we have an intermediary in India with three clients who we have ready to go into trade as soon as the intermediary can find a qualified translator. The intermediary blew the first conference call and if he does not find a good translator, the trader will discard their files very quickly!
7. Only actual owners of the funds or account signatories are recognized by the trading bank or
depository and considered principals.
8. Funds must be in a first-class bank and normally, must have a branch in an acceptable Western jurisdiction. Many traders want funds moved to the transaction bank (under the owner’s control). It is always on a case by case basis.
9. Client and intermediaries for private placement programs should realize it is illegal to propose assets or submit documents that are fraudulent or forged. Illegal submissions are immediately reported to the authorities.
10. Funds (assets) must be screenable in, or confirmed by a top Western Bank. One must have clear legal title from the owner to submit an asset by way of assignment (i.e. bank-acknowledged power of attorney or a corporate resolution).
11. Real private placement program trading groups will not publish write-ups or quote specific yields, except in direct meetings with principals – otherwise, their privileges could be suspended. Neither do they float “contract” forms through intermediaries. Unfortunately, many intermediaries think they can run the process and this IS NOT the case. The job of the intermediary is to collect the full compliance package, submit it and then step back and let the compliance officer and trader run the show. To do otherwise will cause the client not to be accepted and may actually result in them being blacklisted and they will never get into a program, anywhere.
12. Genuine private placement programs do not ask for up-front fees. And the client’s funds are rarely out of a principal’s control – except with a valid undertaking from a major bank or approved equivalent.
13. Programs, yields and rules are in a constantly state of flux because they are influenced by market pressures, government regulations and other factors beyond the control of the
particular private placement group. Investors must follow the traders’ rules and expect to get the details of the offer upon presentation of the contract by the trader or discussions
leading up to that point.
14. Private placement programs are highly confidential and “deniable”, because of its obvious
potential for disrupting other markets. Inappropriate demands, “shopping” an asset and other indiscretions can result in a client or intermediary being “flagged” as a problem and excluded, even without their knowledge. Once blacklisted, you are done in the private placement program field.
15. And yes, client profits are subject to tax accountability to government authorities and to
society as a whole. Genuine traders will never aid, abet or be privy to any form of evasion. Proper tax management and legal avoidance by the client, on the other hand, are perfectly acceptable and are the responsibility of the client.