Due Diligence Part 2

After a Private Placement Offering Goes Live

After a private placement offering is approved for selling, the role of the Managing Broker-Dealer becomes even more important, if not vital, to the success of the offering.

An important responsibility of the Managing Broker-Dealer is to assure that all participants – issuers, investors and brokers (sellers) – have a thorough understanding and a working knowledge of the offering. In simple terms, your MBD assures that sellers know what they’re selling, buyers know what they’re buying, and issuers are clearly communicating the structure, details and changes of the offering in all promotional material.

The private placement offering will evolve as it is sold, although at all times the offering must comply with the Private Placement Memorandum (PPM) by which it is governed, unless amendments are adopted. Regardless of the type of offering, or any special circumstances unique to each offering, oversight by the SEC and FINRA remains constant with the goal of a fundamental responsibility of fair dealing for all parties.

Due Diligence Ramps Up After Offering Approval

Activation of an offering is when more scrutiny becomes the responsibility of the Managing Broker-Dealer.  Ongoing due diligence activities include documentation, verification and independent analysis, and these activities intensify after the offering is launched. One reason for this is the necessary vetting of prospective investors and of brokers selling the offering.

Suitability and Accreditation of Investors

Generally, only “accredited investors” are eligible to invest in private equity and debt securities.  With little movement in SEC rules over the past 40 years in the definition of an “accredited investor,” there are more “accredited” investors today than ever before, so there is greater need to fully vet investors to protect those investors and to help the issuer avoid potential problems later in the life of the offering.

All private asset investors must be assessed for suitability and, in general solicitation offerings, all investors must be accredited by a third-party.  Managing broker-dealers can relieve issuers of these tedious, intrusive and sometimes awkward processes of investor certification.

TOBIN investigates each investor to make sure they validly exist, are properly accredited, have all relevant paperwork including the subscription agreement in current form and filled out properly, that an offering is in the investor’s best interest, and that the security is an appropriate investment for the investor. TOBIN also researches each investor to assure that they comply with all US policies, including anti-money laundering laws through the Office of Foreign Assets Control (OFAC).

Brokers Love to Sell!

Salespeople want to sell, but when selling private securities, just making the sale isn’t enough. In order to achieve the fundamental goal of “fair dealing for all parties,” brokers must adhere to a higher standard.

As your Managing Broker-Dealer, TOBIN performs due diligence on all selling brokers to assure they are knowledgeable, with a record of proven performance and compliance, and to assure that they thoroughly understand the offering. TOBIN ensures that brokers selling your securities are licensed and certified in every state where they sell, while also screening brokers for conflicts-of-interest, past violations, or unscrupulous activities which may disqualify them as bad actors. When brokers begin making sales, TOBIN monitors and records transaction details showing which investors purchased from which broker and all of the related details.

Another critical part of TOBIN’s service as a Managing Broker-Dealer is paying sales commissions, in a timely manner, on behalf of the issuer. This function lifts a huge burden from the issuer because paying commissions and documentation of the sales would usually fall to the issuer’s accounting staff.

Over the two decades that TOBIN has been in business, the Firm has monitored, recorded and processed nearly one billion dollars in offerings and has paid hundreds of thousands of dollars in commissions to brokers.

Many Issuers Need Guidance

Details of any given offering evolve throughout the life of the offering. As such, there is a need to monitor, and provide an outside perspective of all aspects of an offering including marketing documents, advertising, and promotional materials. The offering must adhere to the essence of the PPM as issuers expand the offering and adjust their strategy. An offering is not over until all investors are paid back. TOBIN monitors and assists issuers as needed throughout the issuance process.

TOBIN Helps Issuers Reduce Risk and Stress

With the continuous monitoring, documentation, gating, and checks and balances that TOBIN implements, the likelihood of a successful offering is greatly enhanced. If a complaint by an investor leads to legal action, the cost of not having a broker-dealer is manifested not only in money but also in time. As a MBD for an issuer, TOBIN can save you hundreds of thousands of dollars and hundreds, if not thousands, of hours in such cases. Bottom line – Tobin & Company can save heartache and headache.

Call us. We’ll be glad to answer your questions and discuss your next private placement.

Offering Materials

We structure, prepare and/or review financial models and analysis, private placement memoranda, subscription documents, investor questionnaires, organizational documents and other documents pertaining to the securities offering by the issuer.

Broker-Dealer Agreements

We enter into soliciting broker-dealer agreements with brokers and broker-dealers willing and able to market and sell the securities of the issuer.


We assist with the processing of all subscription documents, offering documents and other documents necessary for finalizing the sale of securities of the issuer.


We ensure that our client’s offering complies with state and federal securities laws, where applicable, and that all filings that are required by regulators are completed and filed.

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