Steps for Applying to a Private Placement Program
This is a process which is critical to understand,
In this article, we will overview the typical process to complete a private placement transaction, and most importantly, we will supply common obstacles that you may face along the way.
10 Steps to Private Placement Success
(1) The client provides proof of funds and passport copy along with their compliance package
NOTE: Most of the assets that people try to apply with CAN’T be used for any REAL private placement program. These include ITR’s (Irrevocable Trust Receipt), SKR’s (Safe Keeping Receipt), T Strips (Treasury Strips), junk bonds, asset-backed bonds, hard assets, real estate, and more. As you can expect, most of the applications at this stage are unacceptable and fraudulent.
(2) Trade group submits the application to the compliance department for review
NOTE: Within hours, most real traders will know if the asset and owner are legitimate. Also, at this time, the criminal background and origin of the funds are explored to ensure they are dealing with a clean applicant. In addition, if the client has over 100M, real trade groups typically either know of the applicant or have seen the person try to apply before. There is a very small circle of real traders, so when someone applies with large assets, the word gets around rather fast.
(3) Client passes “due diligence”, speaks with the trader, and receives the contract
NOTE: Most clients have NEVER been involved with a legitimate private placement before. With that being said, many will show the contract to their attorneys, who have never been through this as well, and they may advise against proceeding due to a lack of familiarity. Needless to say, this can kill the deal, or may make the PPP investor feel uncomfortable. The problem you will run into over and over at this stage is transparency and gaining trust from the client. due to the private nature of the private placement business, there is only so much information the trader can reveal, and this is a common obstacle.
(4) Client signs the contract, and then the trader countersigns it to make it official
NOTE: Once the client signs the contract, there are still a number of potential obstacles before you can “close the deal”. If a client signs the contract and does not complete the transaction, they may be reported to the authorities, and by doing so, they will be permanently prevented from participating in any private placement program in the future. As we said before, there is a small circle of real traders, and if they label a potential client as a non-performer, it is rare that any other REAL trader will spend their time to work with them.
(5) Client contacts their bank to complete the private placement transaction
NOTE: Banks are in the business of making money, and customer requests are secondary to the profit of the bank. When a client asks to block, conditionally assign, or transfer their funds, they are cutting into the pockets of the bank, which we know they don’t stand for. If the bank loses that asset off their books, they actually lose over 25x that amount in potential loans from their country’s central bank (FED/ECB). With this in mind, most banks stall with excuses, since that will frustrate most customers enough to kill the transaction. Even though this may be an obstacle, this should never be a deal killer since it is the client’s money, not the banks. To complete a deal, you either need a bull personality or a great relationship with the bank, otherwise, you may encounter problems with the final steps.
(6) Client’s funds are blocked, conditionally assigned, or transferred to the trade group in accordance with the contract
NOTE: Very few trade groups request that the client transfers ownership of their assets. If they do request this, be very cautious, and expect something is not as it seems. Most private placement traders ONLY need a conditional assignment of assets, temporary beneficiary access, or the blocking of the assets in their favor for the period of the trade. This allows them to access a line of credit that they trade for the client, specific to their contract agreement. Also, so you know, PING programs are 99.9% fake, since they do not allow the trader to access the line of credit, they need to start trading. No bank will loan without collateral, and since “PINGING” the account is not sufficient assurance to the bank that is has collateral in place, it never works. It is just another ignorant broker creation and is most often part of a “bait and switch” strategy.
(7) Trader accesses the line of credit from the trading bank
NOTE: The trader is the only one who can access a line of credit against blocked assets. No one who is trying to complete a scam will ever be able to draw a huge line of credit on blocked assets. The bank completes thorough due diligence on anyone it loans to, and when that loan involves millions of dollars, it is far more diligent. In short, no bank will offer a line of credit for millions to someone who they do not thoroughly trust, so there is not a lot of worry about when blocking assets in someone’s favor.
(8) Trader uses a line of credit to have discounted bank instruments issued from a bank
NOTE: First, the issuing bank sells the instrument directly to the trader for a significant discount (ex. 60% of face value). After the trader buys the instrument, they then sell it to the “commitment holder/exit buyer” (ex. 66% of face), who then sell it to their “commitment holder” for a higher price (72% of face). This continues until someone purchases it with the intent to hold the note to collect the coupon/interest, and the difference between the discounted note and its value at maturity. This is the basic idea of how profit is generated in Private Placement Programs that use bank instruments.
(9) Client receives payment of profits weekly or according to the contract
NOTE: Once everything it set up with the banking, it is a very smooth process to get continual profits into your account. Typically, the first payment is made within 10-15 banking days after trading has started so they can ramp up the account to purchase larger notes. After the first payment, the client will receive disbursements on a weekly basis, or whatever their contract specifies. Most clients and brokers would be best served in setting up international bank accounts, or better yet, they can have an account at the bank where the trading is occurring. This will prevent the need to send external wires through different countries and banking systems. All profits would be internally transferred “ledger to ledger”, and would not attract as much attention.
(10) Client uses profits to fund projects and retains the rest for personal use
NOTE: Most real private placement programs are intended to fund humanitarian projects in underdeveloped nations. Typically, 60-70% of the program’s profits must go to projects, while the remaining 30-40% is for “administrative use”. In essence, the 30-40% can be used at the client’s discretion, but you must make sure you are funding projects as well. The platform does not regulate this, but the FED oversees all of the companies who have applied and received the money in these types of programs.
Once the client completes this 40-week trading process, they can re-enter, but they must have projects to funnel the profits into. Most private placement contracts are for 2 years and are renewed upon expiration if both parties choose.
In summary, if you understand what we have described above you will know how to proceed with a private placement transaction, and be aware of how to overcome obstacles before they present themselves. Though there are some programs that follow different steps, this is the basic template for all REAL private placement opportunities above 100M.
Do I run any risks by submitting these KYC documents and why are they so important?
You are not under any risk. Their presentation is imperative and important since it is the only way to check and verify the quality of the client’s funds or assets. In this business the investor always has to take the first step by providing the required documentation to avoid falling into the” soliciting” rules.
The POF (Proof of Funds) will be issued by the Bank where the investor has the resources deposited, demonstrating their quality and amount, but does not enable ANYONE to move them or dispose of them.
What procedure should I follow to deliver these documents?
Once all the required documentation is submitted (KYC SET Compliance + bank Documentation), we proceed to verify the funds/assets the client brings and to the subsequent Due Diligence (client’s understudy for acceptance).
Once these preliminary investigations are successfully completed, within 48-72 hrs. the Program Manager will contact the client for a formal presentation and also to agree on how to block the funds. Then, the investor will receive a pre-contract to be signed and later sent to the Traders office. Then, it will be the Trader in person who will contact the client.
How and when do I collect my profits?
Yields are collected weekly at the bank designated by the Trader. Ever since the collection of the first profit, this capital will be completely available for the client.
Can I partially or totally remove the invested amount?
The invested capital will remain locked for the length of the program.