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A Tutorial On Managed Buy/Sell Private Placement Programs: Chapter 3






NON-SOLICITATION AND NON-DISCLOSURE

As a direct consequence of the PPOP’s environment where this business has to take place, a non-solicitation agreement has to be strictly followed by all parties involved. This agreement strongly influences the way the participants can interact with each other. Sometimes non-solicitation agreements foster scam attempts, due to the fact that at an early stage it is often difficult for the clients to recognize reliable sources to be in contact with.

There is another reason why so few experienced people talk about these transactions: virtually every contract involving the use of these high-yield instruments contains very explicit non-circumvention and non-disclosure clauses forbidding the contracting parties from discussing any aspect of the transaction for a specified number of years. Hence, it is very difficult to locate experienced contacts who are both knowledgeable and willing to talk openly about this type of instrument and the profitability of the transactions in which they figure. This is a highly private business, not advertised anywhere nor covered in the press, and is closed to anyone but the best-connected, most wealthy entities that can come forward with substantial cash funds.

HOW BANKS AND BROKERS CAN PROFIT

Banks are not allowed to act as clients in such programs. However, they are able to profit indirectly in different ways. This fact permits some private brokers, trading groups, and clients to take part in this process that otherwise would be a banking matter only. The assets coming from private clients are necessary to start the process. These private, large funds are the mandatory requirement for the buy/sell transactions of banking debt instruments. Brokers are necessary to introduce the clients to the trading groups. Thus, each of the involved parties takes their part in the sharing of the benefits, commissions for banks and brokers and proceeds for trading groups and clients).

PROJECTS

The purpose of this type of trading is to finance projects, not generate tremendous profits for the client. These may be for-profit or non-profit and can be funded as a result of this trading.

Since this type of trading generates such large amounts of money on the market, measures must be taken to keep the inflation low. One way to do this is to adjust the interest rates, but this usually has little or no effect. A better way to minimize inflation is to let some of the profit be used for different projects that need funding, such as rebuilding infrastructure in regions of the world that have experienced catastrophes or war.

PROCESS SYNTHESIS

The complete process involving the issuing of debt-notes, the arbitrage transactions, the programs, and the projects is a result of combined market forces. Banks have a method of increasing their revenues and profits, clients are able to finance different ventures, and borrowers are able to access loan funds. There is a supply and demand for such instruments, and as long as the supply and demand exists then also this kind of trading will exist.



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Michael Weiner, PreConstruction Catalysts Inc

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