Independent Financial Consultants
Update on Private Placement Programs
This short article is focused on the realities of private placement in 2023. Our goal is to prevent clients/brokers from wasting their time and risking their money. To achieve this, we will explain the two most important aspects of any private placement deal: “Collateralizing Funds” and “Profit Distribution“. For more information on these critical subjects, please refer below. As you will see, we discuss problems, solutions, and a lot more!
The problem with most private placement programs is the risk factor. If you’re blocking funds (“MT760″) in favor of a “trader’s trust”, you are collateralizing your assets in favor of that trust. This means your funds are at risk if the trader was to default on the line of credit they drew against your asset. In addition, the cost for blocking funds is typically 1-2% of the face value, which is paid upfront to the bank. That is not the scenario you want to be involved in. You have upfront fees, the trader is controlling your money, and there is no clear idea of what you’re investing in.
The solution to this problem is a customized Trust structure. If you set up your own trust, and transfer your money into it, you retain control. All the trader can do is manage your account within the conditions of the contract. Not only can you see all of the activity in the account, but all profits are sent directly back to you. At that point, you pay the trader their share, not the other way around.
Please note, if the money can not be moved from the client’s bank, they can send an MT 760 to their own trust account. By collateralizing funds in favor of yourself, through your trust, you have removed the risk. Now all you have to do is find a trader who can either monetize it or facilitate a line of credit against that MT 760. If the trader is real, they can get a LTV of 75-85% against the MT 760 [SBLC]. Once you have attained the line of credit, it is time to trade! As you can see, the trust is the key component. Without it, you would be sending that SBLC to the “trader’s trust account”, not your own trust account.
The problem with most “trades” is banking delays are inevitable. If you are receiving Millions from an international account, over and over again, it is bound to raise red flags. The fact is, money doesn’t move as easily as it used to. Since 9-11, anti-money laundering laws have made it harder and harder each year. In a typical private placement offer, your profits would be repatriated weekly. Due to recent law changes, this is no longer a reasonable strategy.
The solution to this problem is the Trust. By establishing a trust prior to the trade, you create a safe place to accumulate profits. This will allow you to build your profits in a tax friendly jurisdiction, and if you decide to repatriate the funds, you can do so. The key is, you must disclose your incoming transfers appropriately, while sending larger amounts less frequently.
In summary, most “programs” do not require the structuring of a trust. If a client tries to enter a trade program without a properly structured trust, they will always fail. The only other option is if a client bought into an existing trust which was already involved in private placement. This is not an opinion; it is a fact of the business. Every real platform will require the investor to structure a trust. If they don’t, it is ALWAYS a waste of time.
FOR EDUCATION PURPOSES ONLY
This website is a LIAISON ONLY, and not liable. This general private information is in NO way an offer, invitation or solicitation to invest, buy or sell Private Placement Programs