Ziad Abdelnour, More On Private Placement Programs

At the request of a number of you, and following up on my blogs of April 14, 2010 at blackhawkpartners.com/Blog.aspx?id=14 and April 28, 2010 at blackhawkpartners.com/Blog.aspx?id=16 I thought I’d share these additional thoughts with you regarding “Private Placement Programs” to clear up further misconceptions regarding this all important subject matter.

It is evident that the root of the trouble today in dealing with such programs is a rather unfortunate consequence of unlicensed, ill-informed, non-principal parties such as brokers, intermediaries and consultants who’ve elected to become involved in “private placement” solicitations for which they absolutely have no track record of success and know nothing about.

It is a further fact that far too many good people have previously been, and are still being misled to believe the hype and accordingly, losing their money chasing the commonly claimed myths relating to private placement trading platforms, programs and the use of bank issued instruments and/or securities.

Once again, and for those who keep asking: Successful trading has never, does not, and cannot take place utilizing blocked funds, reserved funds, funds placed under administrative holds, or funds placed into non-depletion accounts. Furthermore, “pinging” is not successfully employed in any form of trading in any market.

If blocked funds were to occur, it is only an “internal blocking” to support the trader’s required collateral for the purpose of trading.

1. Certificates of Deposit (CDs): Bank issued instruments such as Certificates of Time Deposit (CDs) are bank issued negotiable instruments issued to a client based on their cash deposits. The client agrees not to use the deposits in exchange for a pre-defined interest coupon. Interest Coupons for Certificates of Deposit are typically higher than the interest the client would earn with their money in an interest bearing account such as a savings or money market account. Certificates of Deposit are though not used to secure credit lines or loans for trading; nor are they used as collateral to fund projects.

Just to set the record straight: No one can utilize a Certificate of Deposit obtained through a “lease contract” or “joint venture agreement” for trading, trade financing or for project funding, regardless of whether it was leased or joint ventured directly from the issuing bank or a third-party. Often the lessors or joint venture providers will tell their victims that it takes a special high-level banking relationship to use leased instruments. This is complete baloney. Having a banking relationship does not allow anyone to commit bank fraud; neither clients, nor banks.

2. Standby Letters of Credit and Bank Issued Guarantees (SBLCs & BGs): Bank issued instruments such as Standby Letters of Credit (SBLCs) and Bank Guarantees (BGs) and documentary credits are traditionally used as a method of payment, much like a bank issued cashiers’ check for transactions involving the acquisition, buying and selling of actual products or services in global markets where the buyer and seller use the bank issued instruments to effect payment for actual products bought or sold such as commodities like sugar, petroleum products, wheat, corn, et cetera. Bank issued instruments are also used as payment for services in the global markets between providers and buyers of services. Bank issued guarantees and Standby Letters of Credit are though not normally used to secure credit lines or loans for trading.

Here again; and just to set the record straight: No one can utilize Bank Issued Guarantees (BGs) or Standby Letters of Credit (SBLCs) obtained through a “lease contract” or “joint venture agreement” for trading, trade financing or for project funding, regardless of whether it was leased or joint ventured directly from the issuing bank or a third-party. Here again, the lessors or joint venture providers will tell their victims that it takes a special high-level banking relationship to use leased bank issued instruments successfully. This is also completely incorrect. Having a banking relationship does not allow anyone to commit bank fraud; neither clients, nor banks.

3. Collateralized Mortgage Obligations (CMOs): Qualified Agency and Non-Agency Collateralized Mortgage Obligations (CMOs), can be used to secure credit lines for trading. However, no one can utilize Agency or Non-Agency Collateralized Mortgage Obligations (CMOs) obtained through a “lease contract” as collateral for credit lines used for trading, trade financing or for project funding, regardless of whether it was derived from a lease directly from any issuing bank or a third-party. Here again, the CMO lessors will tell their victims that it takes a special high-level banking relationship to use leased Collateralized Mortgage Obligations (CMOs) successfully. This is again complete baloney. Having a banking relationship does not allow anyone to commit bank fraud; neither clients, nor banks.

Bottom line folks:

Absolutely no Trading Platforms, public nor private, regardless of geographic location are exempt from regulatory oversight and governance.

To close and for your information; on Friday November 12, the G20 made a ruling that the only acceptable assets that can go into trade is cash, or AU with SKR from recognized bank. While it is still up to each trader to determine what and how an asset other than cash may be used, most traders will follow the rules as they filter down into the trenches at the trade desks. Of course, a CD IS a form of blocked funds, and with a letter of attestation from the issuing bank that the money is cash, not asset-backed, it is acceptable as collateral for trading.

Hope this clarifies lots of issues regarding those programs and sets the record straight once and for all.

Looking forward to doing business with you and to continue being your resource for deals, capital, relationships and advice…..The ball is in your court.

Leave a Reply

Your email address will not be published. Required fields are marked *