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How Banks and Brokers Can Earn With Private Placement Programs

Banks are not permitted to act as investors in private placement programs, but they are able to profit from them indirectly in various ways (firstly getting big commissions). This fact permits some private entities like private investors, brokers and trading groups to take part in this lucrative business that otherwise would be a banking matter only. The private assets coming from private investors are necessary to start the private placement program process. These private large cash funds are the mandatory requirement for the buy/sell transactions of banking debt instruments and, as a consequence, also the mandatory requirement for the programs through the Trading Groups. Brokers/intermediaries are necessary to introduce the investors to the Trading Groups that exist. Because of this, each of the involved entities share the benefits of these private placement programs (commissions for banks/brokers and proceeds for Trading Groups and investors).


As a direct consequence of the environment where this business has to take place, a Non Solicitation regulation has to be strictly followed by all of the involved parties. This element of private placement programs strongly influences the way the parties can deal with each other and the way they can make contact. This fact can sometimes be also the cause of the origin of scams (or attempts to do so) due to the fact that at an early stage it is often difficult for the investors to realize if they are really in contact with a viable source. Another reason why so few experienced people talk about these trading programs is because just about every contract involving the use of these high-yield instruments contains very explicit non circumvention and nondisclosure clauses which forbids the contracting parties from discussing any aspect of the transaction for a period of years. So, it is very difficult to locate experienced contacts who are both knowledgeable and willing to discuss openly about this type of instrument and the profitability of the transactions in which they figure. Private placement programs are a very highly private business, not advertised anywhere nor covered in the general press, and they are not open to anyone but the best connected and most wealthy people that can come forward with substantial cash funds for trading.

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! 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. bankacknowledged 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.
MONDAY, MARCH 21, 2011

Private Placement Programs Structure - 2

For an investor it is much simpler and usually more profitable to enter a program where the Trader with his Trading Group has already everything in place, such as the issuing banks, the exit buyers, the contracts ready for the arbitrage transaction, the line of credit with the trading banks and all of the necessary guarantees/safety for the investor, etc.) . This way, the investor needs only to agree with the contract proposed by the Trader forgetting about any other underlying problem. Another advantage for the investor/client is that he can enter a private placement program with a substantially lower amount of money against the case to proceed by himself because he will take indirectly advantage of the line of credit of the Trading Group.


Private Placement Programs Structure

Normally, private placement programs are nothing more than a pre-arranged buy/sell transaction of discounted banking instruments using an arbitrage transaction. If an investor had funds of say $100M to $500M, they could create their own trading program by creating for themselves the buy/sell transaction. That is not as simple as it sounds since he would have establish control of the whole process by making contact with the Provider banks for the bank instruments and at the same time for the exit buyers. With all the FED restrictions they have to meet this is not a simple task, plus it is no easy feat to develop the strong necessary connections with the related parties in private placement programs (the issuing banks/providers for the bank instruments and the exitbuyers).

Investors and Private Placement Programs

Some think that the investors in private placement programs are the end-buyers in the chains we spoke of before, but this is not the case. Financially strong companies who are looking for safe investments for the long term are the actual end-buyers. The end-buyers are made up of insurance companies, trusts, pension funds, etc. They are not allowed to participate in-between as investors. The investor in a Private Placement Program is just a cog in the over-all picture among many others. So, who are the other players that are involved in a PPP? Well, they include the trading groups as traders/commitment holders, top world banks who issue bank instruments, intermediaries/brokers and of course, the exit-buyers such as pensionfunds/insurance, etc., who get the advantage to benefit from this private placement program trading. This sometimes causes some discomfort for an investor because he/she usually does not see most of those involved in the process because they will deal with brokers, trading groups / traders and trading banks only. Different clients have varying levels of comfort regarding their financial security in this kind of trading. Investors are "invited" to participate only after they have submitted a full compliance package which includes a POF (proof of funds), CIS (client information sheet), passport copy, a brief summary describing the request, i.e the dollar amount, is it PPP or another service they request, the name of the client's bank and is it cash or a bank instrument that he wants to put into trade? Also, in what country is the client and the bank located? A lot of intermediaries/brokers and clients try to pester the trader or his representative with questions and want to go back and forth and get all of their ducks in a row before submitting their compliance package. Many have a rude awakening when they are told to go elsewhere. This often occurs with unsophisticated players who do not understand the protocol involved in private placement programs.

They just don't give out details until you can show you are a real client. They are too busy helping the many humble and responsible people who are waiting in line to get into good trades to deal with multiple questions and difficult personalities and bad attitudes. Once they review the compliance package and it has passed their due diligence, the client will be invited to participate and full details will be revealed at that time. This does not commit the client to anything because he has not signed a contract. After a conference call, it is up to the client to move forward or not.

Private Placement Programs and High Yields

Private Placement Programs usually get a very high yield when compared with the common yield reached with the better known traditional investments. The common man in the street cannot comprehend how one can obtain a high yield per week and feel it is only possible if you are a loan shark! Way back in high school, I remember seeing a quote in the Reader's Digest by an unknown person that "ignorance is a voluntary misfortune" and I think that applies aptly with private placement programs. Remember, you cannot compare apples to oranges. Compared to traditional ways of investment and trading (especially in the stock market), these higher yields seem incredibly high to the average man on the street (even to some bankers), but they do exist and are being performed everyday by those in the know and of course, with the funds to be invited into private placement programs.

Arbitrage and Leverage and Private Placement Programs

The central element of private placement programs, trading and their safety, stems from the fact that a PPP sets up a buy-sell transaction under what is called "arbitrage". What this means is that the instruments are bought and sold at the same time, but with pre-defined prices. There is also a group of buyers and sellers that make a chain who are contracted, including exit-buyers that are made up of other banks, institutions, big companies, wealthy individuals or insurance companies. It is important to understand that with private placement programs, the instruments that are issued are not sold directly to these exit buyers, but rather to a line of anywhere from three to fifty investors. And even though the banks that are involved cannot participate directly by acting as in-between buyers or sellers, they profit indirectly due to the fact that they make interest on the money they lend or the lines of credit they set up for investors and traders. This is where the leverage comes in. The banks also collect commissions off of each buy and sell transaction from the debt bank instruments involved in the trading circle of the private place program. Under this type of situation, the trader or investor's principal does not have to be used for the transactions. The principal is only reserved as a compensating balance against the credit line, or in other words, it is "mirrored". The line of credit backs up the arbitrage buy/sell transactions, but because the trading is done as arbitrage, the credit line (money) is not really used, but it must be there and available to back up every buy and sell transaction.

These private placement programs never fail because they do not take place until all of the players are in place with contracts that let them know how they will profit and what role they will play in the transactions. By using leverage, a trader or investor can control credit anywhere from ten to twenty times that of the actual principal. It should be noted that even though they are in control of that money, they are not able to spend it. They just have to show that they have the money, control it and that the money is not being employed somewhere else during the time of the buy/sell transaction. So, as you can see, the money is never actually spent because the trading is done as an arbitrage transaction. Look at it kind of like Frank and Mike on American Pickers, but on a larger scale. Let's say the two pickers are out free styling (just driving down the highway looking for old buildings that might contain some old valuable collectibles). They see a property with several ancient buildings and something about them catches their eye. They pull over and after introducing themselves, discover the owner has some old bikes in one garage. They open the door to a really old structure and discover there is a old BSA (Birmingham Small Arms) motorcycle sitting there. With their knowledge of vintage bikes, they ask the owner if it is for sale and if so, what price did he have in mind. The guy says he would be willing to let it go for $5K. The guys know they can find somebody to take it from them for $10K in its present condition in a heart beat. Now unlike under private placement programs where the buy-sell transaction takes place at the same time, there will be a short time delay for the guys since they have to load it up and take it back to their shop in Iowa. The guys still have to have control of the cash to pay the owner and in this case, hand it over. With arbitrage, they just have to show they control the money and it's there, so it is one step better than what the American Pickers guys are doing and instead of making a $5K profit, private placement programs allow you to make hundreds of thousands of dollars and sometimes, millions of dollars! Private Placement Programs use discounted bank instruments with arbitrage transactions. But unlike Frank and Mike, the trader/investor never has to spend the money, just be in control of it. The trader's principal is directly reserved for this (or indirectly) in order for the trader to leverage his money. As said above, this allows the trader to use a credit line that is from 10 -20 times that of the principal, so he is basically trading with 10 - 20 times as much money. Where brokers and investors that are new to private placement programs get confused is that they are under the mistaken belief that the trader's money must be spent just like under the traditional way of trading where you buy low and sell high. They are bogged down with how trading is done on the open market with securities and bank instruments, but they are two separate and distinct animals. Private Placement Programs ( PPP ) set up arbitrage transactions only if there is a chain of "contracted" buyers. We actually used to do this with real estate for many years before Big Brother stuck his nose into real estate and destroyed a perfectly legal way to do transactions. We'd go out and find a house for one price, draw up a contract with a clause stating that closing would occur when we found an end buyer for a certain higher price and he could come to the closing table with the money (mortgage) to buy from us. Our biggest

profit doing it this way netted us about $40,000, good, but no where near what the returns a Private Placement Program can generate, plus ours was a one time deal, unlike the 40week trading programs using a PPP. With a 40-week private placement program, the trader gets paid forty times!

Basic reasons for private placement programs.

One reason why private placement programs (PPP) exist is to create money. When you create more debt, you create more money (all too evident by America's Federal Reserve System). Suppose you lend a friend $1000, with the agreement that they will pay you 10% interest for that loan so that she must pay you back $1100. You have just created $100 on paper, but you cannot see the hundred bucks. Our banks do this daily, but with quite a bit more money. As mentioned above, the Fed creates money out of nothing all of the time (hence the inflation they say we "don't" have). All of that aside, Private Placement Programs ( also known as Private Placements Platforms") involve trading with discounted bank issued debt instruments such as bank guarantees (BG), medium term notes (MTN), stand by letters of credit (SBLC), etc. All of these create "money" because money is created out of debt and all of these bank instruments are deferred payment obligations. In theory, any entity (company, individual or organization) can issue debt notes which are nothing more than deferred payment liabilities. Personally, I have done this numerous times over the years when selling a property on contract. This gives one the option to collect payments over the years, or as I did in certain cases, sell that note for a discount. The entity that issues these notes can issue as many such debt notes at whatever face value they want to as long as other parties feel he/she/it is financially strong enough to honor them upon maturity, and thereby is interested to buy such notes. When I sold a $150,000 house on contract and collected say a $10,000 down payment, I could have created one note for $140,000 or two or more notes, as long as they totaled no more than $140k. I then had the option to discount those notes and collect a lesser amount, in a quicker period of time. Every day, major banks issue these instruments at a discounted price and normally, they total in the billions! Unlike me as a real estate investor, they "create" their notes out of thin air in a manner of speaking. All they have to do is create the document. Though creating a debt note is very easy, they have that one basic problem, which is finding a buyer who believes that they are strong enough financially to honor that debt note when it matures. Let's say you had the chance to purchase a bank note with a face value of $1M USD for $800k that matures in 1 year, wouldn't you consider buying it if you had the chance to verify it, and if it was from one of the largest banks in Western Europe?

But what if Joe Blow comes up to you and inquires if you wish to purchase an identical debt note issued by an unknown bank, would you consider that offer? It all boils down to a matter of trust and credibility. That is why there's so much fraud and so many fake instruments in private placement program business. To be continued.....

Basic Requirements of Private Placement Programs

One thing you need to be aware of is that private placement programs (ppp) are not suited for most people. Normally, there is a lot of capital required (although some private placement programs will allow you entry with just one million dollars, as we do with a few of our programs). The investor must have strong banking relations with a major bank, a temperament that is disciplined, a view of finance that is sophisticated, be willing to listen and follow instructions with a humble attitude, the ability to make sound business decisions and be able to execute and follow through.

While this may sound simple, it's not for most people. A client cannot go into private placement programs with ego and attitude. No on will take such a client. Going into a program like this is a privilege not a right. Generally speaking, they will not talk to anyone who cannot prove they have the investment funds and that they are who they say they are. That point is not negotiable. The people running these programs are too busy helping the many humble and responsible people who are waiting in line to get into good trades to deal with difficult personalities and bad attitudes. This applies equally to clients and brokers.
In this business, it is by invitation only which is usually offered on a personal level to known individuals who qualify and fit the mold and will follow the trader's protocol. Often, those with sufficient capital to enter private placement programs are used to being the head honcho and calling the shots in their own business, so they think they can negotiate their own deal and terms based on their own ideas and often a lack of solid understanding . They learn the hard way that with this kind of attitude, they are shown the door with no transaction and with a very special invitation not to come back again! End of story. Then they go out and complain that the trader 'didn't perform'. C'est la vie! Another big hurdle are brokers. There is widespread mistrust among them and fear that if they present a compliance package, somebody is going to go around them. The end result, their client's package is not presented to a trader, the client misses out on a very profitable program and the broker misses out on what could be a life changing transaction, financially speaking! Having said that, what are the financial qualifications for a qualified individual? $500 million USD and above are the top echelon programs. $100 million USD (or Euro) provides ample opportunities. $10 million or more: opportunities exist but often on a private basis. Under $10M is considered 'small cap' and opportunities are very rare. When they can be found they usually require special arrangements.

In view of the above, past transactions indicate that clients can be placed in each of the above mentioned private placement programs, provided that they understand and follow the necessary procedures required of each individual situation. One very important factor to keep in mind is that cash is king in this business. A person with an account holding the required cash, or cash backed instrument which is totally under his own full signatory control, or with partners or directors with him, will always get moved to the front of the line. We'll discuss all the various instruments people want to use instead of cash

in posts to follow. Most clients work through a broker, attorney or advisor of some kind. This is all well and fine for the preliminary work and vetting. But in a short time, someone will want to talk directly with the client himself to assure a complete understanding on all sides and that they are real. All intermediaries are protected. For those used to working in private placement programs, they know it is a gentleman's business done in a very small circle of global elite, well regulated and licensed financial houses . The law of the jungle does not rule here and brokers, etc who adopt the wrong attitude will find that it won't be long before their name is known and passed around the globe and before they know it, nobody will look at their files. In private placement programs there is complete transparency and full disclosureat the appropriate time. With that in mind, IN ALL CASES, due to non solicitation regulations there will be little to NO information provided to the investor on the trader, the trading group or other functionaries until or unless the client has already presented himself first with his compliance package, qualifications etc. and has been accepted by the legal compliance department. IF, and when the client is invited to participate, he presents himself and his credentials in most cases not knowing exactly who is on the other end handling the trades. But once he's passed due diligence and been accepted and officially 'invited', everything will be completely open and he will be dealing directly with the principals. At this point any brokers and intermediaries take a back seat to the proceedings.

Critical Issues Of Private Placement Programs

This subject is not talked about much outside conversations with VIP clients. If you are familiar with the business, you understand the reasons. But since we spend so much time and effort replying to so many emails on this topic, we hope to use this blog to clarify some very important issues simply from an educational standpoint so that if your client, or you, are considering entering a private placement program (PPP), also known as a private placement platform, you will have a good understanding of the critical issues before doing so. Due to the amount of information involved, we will present a couple of key points for your understanding and highlight a particular private placement program opportunity in each of the next several posts on this topic. We've never seen anything spelled out in such a way as to make this business perfectly understandable and why it exists in the first place. It's an excellent opportunity no matter what your level of understanding is. This is for general educational purposes and nothing more. We hope you find this blog on private placement programs useful and interesting.