The “Private Placement Program” which we describe here is the process to trade discounted bank instruments (MTNs, BGs) to generate profits, and should not be confused with “Private Placements” of private equity shares, for example to raise funds pre-IPO.
An MT-760 Swift message is used to block funds in favour of a third party, collateralizing the asset via this message, while allowing for loans and liens against it. The fees for blocking a large amount of funds via MT-760 are about 1-2 %. Once the MT 760 reaches the trader’s account, the line of credit should become available within about 3 working days. At that time, the trader should be able to make their first bank instrument purchase and give a clear timeline to the investor for the first profit disbursement.
The key to run a successful PPP is to find a real trader. When an investor considers a private placement program, one should always be skeptical of the offers. Since there are only a few “real” traders in the markets, the chances of finding one are not very high.
Traders in these secondary markets usually don’t advertise their services on Facebook.
THE APPLICATION STEPS
1. Compliance package: the investor provides a proof of funds and their compliance package
2. Trader or trade group submits application to the compliance department for review
3. Investor “due diligence”, trader contact, contracting
4. Investor contacts their bank to complete the private placement transaction
5. Investor´s funds are blocked, conditionally assigned to the trader in accordance with the contract
6. Trader accesses the line of credit from the trading bank
7. Trader uses line of credit to deal discounted bank instruments issued from bank
8. Investor receives payment of his part of the profits weekly
Most Private Placement Programs are intended to fund Humanitarian projects. Typically, 60-70% of the program’s profits must go to projects, while the remaining 30-40% is for “administrative use”. As a result, the 30-40% can be used at the investor´s discretion. In any case, the investor must make sure he is funding projects. Actually, the platform does not regulate this, but authorities like the FED or the European Central Bank oversees all of the parties who have applied and received money in these types of programs.