The process to enter a trading platform or private placement program is important to understand to be successful. Unfortunately much confusion and misinformation has circulated concerning how to reach a private placement program trader or private placement platform, which is why we will shed light on the structure in this article. The following is a brief summary for those high net individuals interested in using a trading platform for funding humanitarian projects and commercial real estate projects.

1. Client Information Sheet (CIS) and Proof of Funds (POF). A client must first submit the CIS with POF to even be considered for the opportunity. The CIS helps the platform screen out those who may have fraudulent assets or clients with criminal background as neither of these will be cases will result in a successful trade. Furthermore, the asset (liquid cash, medium term not (MTN), bank guarantee (BG), precious gems) must be verified as an asset that can be used in trade.

2. Compliance process. After CIS is send, a compliance process is undertaken where the platform conducts due diligence to ensure the validity and character of the client in depth. Clients with over $100M in assets are usually well known to the private placement program and private placement traders.

  1. 3. Contract state. After Due Diligence is performed by the trading platform, a contract is issued. Generally this is where arrogant clients stop as many believe they are above the trader and can negotiate terms. Furthermore, some clients will turn to their attorneys for advice which is futile as most lawyers do not understand the industry and have not been exposed to a real platform.

4. Official signing of contract. If contract terms are agreed upon, both the private placement trader and high net worth client sign the agreement, hence “closing the deal.” At this point a client must follow through with the transaction without hesitation or he/she risks never being allowed in the private placement program trade again. The client will be labeled as a “non-performer” and may at this point become blacklisted.

5. Banking stage. Next, the client contacts the bank to initiate the private placement transaction, which includes blocking the funds/assets or conditionally assigning or transferring funds in favor of the trader. Banks hesitate to do this as they lose the asset on their balance sheet and lose the power to leverage the funds 25x to loan out to others, thereby decreasing the bank’s potential income. The client must hold steady as remind the bank that it is his/her money. Using a top banking center with a large amount of assets helps mitigate this obstacle as 100M up to $1B may not hurt a larger bank as much as it would a smaller one.

6. Line of credit established. The clients funds will be used to draw a line of credit (LOC) for trade. This may or may not require moving funds into the traders bank of choice.

7. Trader obtains banking instrument for trade. After acquiring the LOC, the trader will then identify his exit buyers before purchasing the banking instrument (medium term note, bank guarantee, or other) to trade. The high net worth individual will then receive profits on a scheduled basis for usually a period of 40 weeks, although different payment terms may be made.

8. Funding. Profits are then used to fund humanitarian or commercial real estate projects, usually in underdeveloped nations. Usually 70% will be used for humanitarian use while the rest remains for “administrative use,” in other words, at the discretion of the client. The FED oversees how the remaining 30% is used as this is a highly regulated transaction.

9. Other pointers. The transaction NEVER requires any upfront fees. Moreover, after a successful trading period ends, the client may wish to reenter the trade depending on the status of projects. You should initially work with someone who is well versed in PPP to help guide you in the process although this is a basic template to follow. Experience and relationships are key in this area, so if one is not familiar with the transaction steps above is it highly recommended to consult with someone who has dealt with a private placement trader or facilitator.

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Author: Ason Jackson

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