Bank guarantees

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  • Publicado : 11 de noviembre de 2010
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As a proof of funds provider, we work closely with traders of commodities, MTN, Tstrip, SBLC and BG's as well as Private Placement Programs. We get lots of questions from customers about private placements. Here is this month's article on: Glossary of Private Placement “Lingo”/Key Terms

In the private placement world, there are a number of unique terms which are important to understand andimplement. For us, learning them took endless questions and research, but after 7 years of persistence, we finally mastered the language of “brokerland”. To help our readers avoid the same learning curve, we created something which everyone can appreciate, a “Private Placement Glossary”. Providing OVER 85 of the most important terms in the private placement business, we GUARANTEE you will NEVER findanything more comprehensive, or well-detailed. Below we have listed various acronyms, phrases, and other unique terms which are commonly used in the private placement community. Scroll down, it’s a long page, but it will prove invaluable in your journey to success! PRIVATE PLACEMENT ACRONYMS BCL (Bank Comfort Letter): A letter written by a bank officer on behalf of a customer, attesting to thecurrent balance and good standing of an account holder. BG (Bank Guarantee): A bank instrument, guaranteeing a certain face value for an investor, while collecting an annual interest before expiring upon maturity. CD (Certificate of Deposit): A financial product offered by banks to account holders who agree to leave their funds on deposit for a pre-defined period. This allows investors to collect ahigher annual interest, while securing their money in a low risk venture.

CIS (Client Information Sheet): One of the compliance documents typically required for private placement programs. This document asks for basic information such as the contact details, and line of business the applicant is in. CMO (Collateralized Mortgage Obligation): A mortgage-backed, investment-grade bond thatseparates mortgage pools into different maturity classes. By creating a CMO, the bond issuer can collect immediate capital while the purchaser gets the bond at a discount from face value, and collects annual interest. Though these bonds are frequently found in the private placement business, most of them are worthless since the financial crisis hit. DTC (Depository Trust Committee): A third party companywhich provides clearing and settlement services by immobilizing securities, and making “bookentry” changes to the ownership of assets. This medium is used in private placement programs to transfer/assign assets to a trader, from an investor. FPA (Fee Protection Agreement): An official document outlining all fees due to intermediaries upon the completion of transaction. This is critical for anyprivate placement broker to understand, and utilize. ITR (Irrevocable Trust Receipt): A receipt confirming and detailing the deposit of specific assets into a trust. Though the ITR contains all details of the asset, banks typically will not assign a value to it since the asset is NOT deposited in a credible bank, but rather a private trust. JV (Joint Venture): An agreement between two entitiesoutlining compensation, fees, and the obligations of both parties in relation to a specific business venture. This is the most common legal structure for private placement programs. KYC (Know your Client): In some cases, this form will substitute for the client information sheet. Just like the CIS, it requests contact details and other related information. Also, this phrase is used when referring to the“Know your Client” law, which many investment markets enforce. It states that you must know your client well, and unless deceived, you can incur certain liabilities for future problematic actions of the client.

LOI (Letter of Intent): A letter provided by investors interested in a private placement programs, defining their unsolicited interest to enter the investment transaction. This...
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