Actually, that is a question that most don’t know the full answer to. In fact Private Placement Programs are very simple to understand. The problem is 99.9% of those in the Private Placement business have never closed a deal. How can you truly understand the full process of a deal if you have never closed one??? SIMPLE ANSWER, YOU CAN’T!!!
I will overview the basic process to successfully complete a Private Placement Program transaction below. In addition, I will supply common situations that develop along the way.
(1) Client fills out the compliance documents and provides proof of funds and passport copy
NOTE: Most of the assets which people try to apply with can not be used in any private placement program. These include the ITR (Irrevocable Trust Receipt), SKR (Safe Keeping Receipt), junk bond, asset backed bonds, hard assets, and more. In addition, most of the applications received for Private Placement Programs are fraudulent.
(2) Trade group submits the application to the compliance department at the bank
NOTE: Within hours most real groups will know if the asset and owner are legitimate. If the client has over 100M, most of the time real trade groups have seen the application before. There is a very small circle of real traders, so when someone applies with large assets the world travels fast.
(3) Client passes through compliance and receives the contract
NOTE: Most clients have NEVER been through this process before. With that being said, they show the contract to their attorneys who have never been through this as well. This leaves a number of circumstances which can develop. Due to the private nature of the private placement program business, there is only so much information the trader can reveal to the client.
(4) Client signs the contract and the trader countersigns it
NOTE: Even after the client signs the contract, there are still a number of hurdles to overcome to close a deal. If a client signs the contract and does not complete the transaction, they will be reported to the proper authorities and will be permanently prevented from participating in any private placement program.
(5) Client contacts bank to complete the transaction
NOTE: Banks are in the business of making money, and nothing else. When a client asks to block, conditionally assign, or transfer assets they are cutting into the pockets of the bank. If the bank loses that asset off their books, they actually lose 25x that amount since they leverage loans from the FED. With this in mind, most banks stall since that will frustrate most customers enough to kill the deal. This should never be the case, it is the clients money not the banks. With this in mind, you need a bull personality or a great relationship with the bank if you are a client who wishes to complete what is needed.
(6) Funds are blocked, conditionally assigned, or transferred to the trade group specific to the contract
NOTE: Very few trade groups call for the transfer of assets, if they do be very cautious. Most private placement program traders need conditional assignments, temporary beneficiary access, or the blocking of the assets in favor of them for the period of the trade. PING programs are 99.9999999% fake, and do not allow the trader to access a line of credit. No bank will loan without collateral, remember banks are in the business of making money.
(7) Trader accesses line of credit from the bank within 72 hours
NOTE: The trader is the only one who can access a line of credit against blocked assets. No bank will offer a line of credit for that amount to someone who they do not thoroughly trust.
(8) Trader uses line of credit to have bank instruments issued at a discount and makes trade
NOTE: The bank issues the instrument directly to the trader for a significant discount (ex. 55% of face value). The trader then has a contract with someone who has agreed to purchase it at a higher amount (ex. 62% of face value). The trader buys the instrument and then sells it to the “commitment holder”, who then sells it to their “commitment holder” for a higher price (69% of face value). This continues until someone purchases it with the intent to hold it and collect the coupon/interest.
(9) Client receives payments weekly according to contract
NOTE: Once everything it set up, it is a very smooth process. Typically the first payment is made within 10-15 banking days after trading has started. After the first payment, the client will receive disbursements to the provided bank account on a weekly basis. Most clients and brokers should set up offshore accounts, or have internal transfers sent to the bank where the trading is done. Otherwise, USA/EU authorities will flag accounts which is obviously not good.
(10) Client funds projects and retains the rest for personal use
NOTE: Most real private placement programs are intended to fund humanitarian projects. Typically 70% of the profits must go to projects, while the remaining 30% is for “adminstrative use”. In essence, the 30% is the clients to use freely. The platform does not regulate this, but the FED overseas all of the companies who have applied and received money to ensure they are conducting business properly.
In a nutshell, that is a summary of the typical private placement program transaction. I hope this helped, and feel free to contact me with any questions.