Introducing Your Offering to the Broker-Dealer Channel, Syndicate Management Technology (Part 2)

Issuers of investment opportunities have a vision for growth of their company, fund, or project. There are several ways that issuers can raise private capital. Many issuers utilize the Issuer Exemption, which provides a path to investor capital from accredited and/or sophisticated investors; most first-time issuers will raise funds from friends and family. As issuers look to expand beyond their personal network, they may elect to use a placement agent or Managing Broker-Dealer (MBD) and to move into the Broker-Dealer (BD) channel. The BD channel has the potential to significantly increase the amount of capital raised, through institutional and advisory networks, but can be difficult to navigate without a professional.

Issuer Offering Distribution

            As’s Chief Compliance Officer explains, “The issuer exemption was meant to provide a safe harbor for employees or directors of the issuer, so that small businesses could raise money more easily and inexpensively. This safe harbor would allow the issuer to avoid registering as a broker-dealer, as they are acting on behalf of their company, not buying and remarketing the securities of a third party.”

Firms raising capital under the issuer exemption must follow the same rules as a broker-dealer and are subject to examination by the SEC and state authorities. Compliance is an important consideration when looking for capital from professionals ­– such as Registered Investment Advisors – as professional firms have elevated standards.

A Managing Broker-Dealer (MBD) can be employed to help structure the offering and increase its distribution. The MBD uses their own network of investors and advisory firms to raise capital. Issuers and MBDs work out the terms of their selling arrangement and the MBD often receives a commission or fee for the capital raised.  

Syndication Management

Once an MBD has been engaged, the MBD may choose to leverage its network of selling brokers and advisors, to exponentially expand the offering’s reach. When an MBD extends their clients’ investment opportunity to selling broker-dealers or registered investment advisors (RIAs), they create a syndicate. MBDs offer a portion of their total commission to selling partners and their representatives for capital raised from their clients. In turn, the selling partners provide their investor network with access to the MBDs offering.

Selling group structures are often only accessible through an MBD. Managing these networks and relationships falls on the MBD. Syndicates have the benefit of using knowledgeable and professional representatives to promote an offering. The effect of extending an issuers’ investment opportunity to multiple selling partners establishes what can be a long-standing relationship between the client and selling partners.

Going Beyond Traditional Syndication Management serves several groups within the traditional offering syndication channel. As a software provider, we assist MBDs with syndicate management. MBDs white label our software which tracks commission splits, allows for selling partners to enter into selling agreements, and allows for secure investment subscriptions. MBDs also can utilize our services as a selling broker to bring in capital directly.

We provide selling brokers, RIAs and hybrid firms with access to high-quality offerings that they can then provide to their clients. Ventureco Holdings, Inc. is made up of two wholly owned subsidiaries, Brokerage Services, LLC, a 50-state FINRA member broker-dealer, and Services, LLC, a technology provider for private capital markets.

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.

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