Increase Security, Compliance, and Efficiency with Syndicate Management Technology (Part 1) Services’ Syndication Software Solution Services has developed a new software solution to fit the traditional syndication process. Managing broker-dealers (MBD) and sponsors who implement our syndicate management software gain access to their own personalized and user-friendly administration portal. This portal provides a powerful tool for managing compliance, organizing due diligence materials, executing selling agreements, and processing subscriptions for private placements. The portal helps an MBD or sponsor manage syndicate members to significantly broaden their potential pool of investors.

The MBD or sponsor puts investment materials on their own custom-branded portal, which includes:

  • A back-end offering administration portal
  • A front-end subscription interface for investors, advisors, and registered representatives
  • An offering teaser page
  • A secure virtual data room
  • Compliance and due diligence management tools
  • Pre-populated forms with legally binding e-signature features

Compliance, E-signature, and Security Tools

Sponsors, broker-dealers, and selling partners all need to manage compliance effectively and efficiently. Compliance tools that help collect and manage know-your-customer (KYC) information, verify accreditation, check suitability, and perform anti-money laundering (AML) checks are all built into the subscription workflow. Risk and disclosures are appropriately provided in the workflow as well. Documents are revision-controlled, time-stamped and watermarked. The e-signature process is compliant with ESIGN (2000) and UETA (1999) laws. E-signatures within the software are legally binding in all cases where federal law applies and in almost all of the states, when state law applies[1]. MBDs and due diligence officers (DDOs) care about data security and privacy because their clients trust them with highly sensitive information. The software was built to improve data security, including encrypting data in transit and rest, thus seeking to maintain compliance with all laws around data security.

The software also gives the MBD or sponsor oversight over the syndicate. They establish their own syndicate management settings within the administration tool. They can:

  • Securely upload due diligence materials
  • Store with a WORM 17a-4 compliant backup
  • Offer and execute selling arrangements
  • Customize the fee structure and track commissions
  • Accept or deny access to the virtual data room
  • Approve or reject syndication partners
  • Automatically track and report on investor activity

Building a Syndicate

Due Diligence Officers (DDOs) at invited firms can review an offering, if they are interested in joining the syndicate. They are given access to necessary due diligence documents through a virtual data room. The MBD chooses which documents are made accessible to executives, representatives, and investors. DDOs can negotiate terms and execute a selling arrangement with the MBD. This eliminates the classic, yet chaotic, paper shuffle. Storing all due diligence documents in a secure cloud-based server improves efficiency, security, and data integrity.

Once a selling agreement is executed by all parties, the new selling dealer can invite its representatives to view the offering. Broker-dealer representatives and independent advisors present the offering to their clients. If the offering is suitable and attractive to an investor, the representative can subscribe the investor to the offering as a third party, or help investors subscribe themselves. The software tracks and attributes each subscription so that commission splits are automatically allocated.

The Secure Syndicate Network

Representatives easily guide investors through the subscription process.

  • Any selling dealer can invite investors. Representatives and investors must view the offering documents, including the private placement memorandum, subscription agreement, pitch deck, and financials.
  • Tools are embedded in the portal to collect KYC, check AML, establish suitability through a questionnaire, file Blue Sky documentation, verify accreditation and client identities, and fulfill other compliance procedures.
  • The majority of the subscription process can be completed through the platform.
  • Investors can make an offer. The sponsor accepts or rejects offers presented by the MBD.
  • If the offer is accepted, subscription agreements may be electronically executed. Some qualified accounts and custodians may need to fill out an additional document and transfer funds on behalf of their client.

Through our client relationships, we understand that data protection and security is crucially important to MBDs and their selling partners. Our clients care deeply about their client data protection. Clients need to know that their investor networks – that they have spent years or decades cultivating – will not become publicly available to other syndicate members. The portal is designed to be an asset in providing the highest standard of data security that the industry has come to expect. The portal protects client and firm data through separate tokenized vaults, WORM compliant archiving, encryption and extensive other data integrity measures. Addressing the needs of compliance, security, and due diligence has been the foundation of the syndicate management software. If you’d like to learn more, don’t hesitate to get in touch.

This publication is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. It does not provide that necessary customization of  advice, tailored to a client, which would be provided by an accountant or tax lawyer.  The views and opinions expressed in this article are those of the author’s and do not necessarily reflect the official policy or position of Holdings, Inc.

[1] See “U.S. Guide to Electronic Signatures”, by Adobe Sign.  Link.

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