LTN PURCHASE
Frequently Asked Questions
Information About Brazilian LTNs > Informações Sobre LTNs Brasileiras
SUBMISSION PACKAGE
Why does this purchase program require copies of physical bond documents when bond information is available by black screens?
The LTN Program wants to make sure that the bond owner can provide them because (1) they will be the basis for the “Safekeeping Receipt” at the transaction bank and (2) they will need to be conveyed along with the physical bond to the buyer at closing. Once the transaction starts moving forward and the Program Facilitator is investing their money in up-front costs, they want the transaction to close as quickly as possible and to not be delayed by bond owners having to go out and obtain updated documents at that late date.
Why are STN documents with stamped dates in 2017 or later required?
As of January 2017, Tesouro Nacional and Banco Central do Brasil (BCB) put in place a new bond authentication process. As of that date the transaction bank can verify the ownership, documents and the authenticity of a bond utilizing a secure bank to bank online portal. This new authentication method no longer requires SWIFT communications with BCB and reduces the time and expense associated with verification and due-diligence. Bonds documents actualized prior to 2017 do not have the codes issued to utilize the new verification system.
Why will a current Transport document be required before closing?
This is a requirement of the transaction bank. A current and valid transport certificate is required by the bank when they receive the instruments and associated documents so that they can accept bonds and issue a safekeeping receipts with full banking responsibility. The transport will also be required by the buyer when the instrument is conveyed at the time of closing. Both parties must be confident that there will be no legal complications with Brazilian authorities.
Why will a current GRU and receipt be required before closing?
A current and valid proof that all taxes due on the LTN is required by the bank when they receive the instruments and associated documents so that they can accept bonds and issue a safekeeping receipt with full banking responsibility.
Why won’t the purchase program compromise on their list of “required” documents?
This LTN purchase program is designed to convert a worthless LTN bond into a cash-backed Global Note that is recognized by the market as having value. This involves cash-backing by a reputable bank and creating an instrument that can be traded on the secondary market. To accomplish these objectives, the program facilitator must meet stringent banking requirements for each of these tasks. The requirements for updated documents come from the transaction banks, not from the Program Facilitator.
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Why does this purchase program require copies of physical bond documents when bond information is available by black screens?
The LTN Program wants to make sure that the bond owner can provide them because (1) they will be the basis for the “Safekeeping Receipt” at the transaction bank and (2) they will need to be conveyed along with the physical bond to the buyer at closing. Once the transaction starts moving forward and the Program Facilitator is investing their money in up-front costs, they want the transaction to close as quickly as possible and to not be delayed by bond owners having to go out and obtain updated documents at that late date.
Why are STN documents with stamped dates in 2017 or later required?
As of January 2017, Tesouro Nacional and Banco Central do Brasil (BCB) put in place a new bond authentication process. As of that date the transaction bank can verify the ownership, documents and the authenticity of a bond utilizing a secure bank to bank online portal. This new authentication method no longer requires SWIFT communications with BCB and reduces the time and expense associated with verification and due-diligence. Bonds documents actualized prior to 2017 do not have the codes issued to utilize the new verification system.
Why will a current Transport document be required before closing?
This is a requirement of the transaction bank. A current and valid transport certificate is required by the bank when they receive the instruments and associated documents so that they can accept bonds and issue a safekeeping receipts with full banking responsibility. The transport will also be required by the buyer when the instrument is conveyed at the time of closing. Both parties must be confident that there will be no legal complications with Brazilian authorities.
Why will a current GRU and receipt be required before closing?
A current and valid proof that all taxes due on the LTN is required by the bank when they receive the instruments and associated documents so that they can accept bonds and issue a safekeeping receipt with full banking responsibility.
Why won’t the purchase program compromise on their list of “required” documents?
This LTN purchase program is designed to convert a worthless LTN bond into a cash-backed Global Note that is recognized by the market as having value. This involves cash-backing by a reputable bank and creating an instrument that can be traded on the secondary market. To accomplish these objectives, the program facilitator must meet stringent banking requirements for each of these tasks. The requirements for updated documents come from the transaction banks, not from the Program Facilitator.
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PROCEDURES
After fully meeting submission requirements, are any of the program procedures negotiable?
It is possible that some procedures may be modified, however, any proposed exceptions or deviations from the standard procedures outlined in the Prospectus would need to be submitted in writing and be reviewed and approved by at least the Program Facilitator and the transaction bank and perhaps also by the Buyer and by Euroclear attorneys. It will be difficult to change the standard procedures that have been negotiated with and approved by the attorneys of several entities.
Why is the program prospectus so long and detailed?
The international banking community and banking regulators require full disclosure of every aspect of the program for sophisticated investors and their attorneys to review. The document is prepared by lawyers and must be approved (1) by a reputable financial services firm (Deloitte Touché), (2) the transaction bank, (3) the potential buyers, and (4) the Euroclear exchange attorneys. All relevant information must be included in this document, including every conceivable potential risk.
Since my bonds are already located in a reputable storage facility in Europe, why do my bonds have to be put into safe-keeping in the transaction bank?
The transaction bank must secure the bond in their facility to issue a Safekeeping Receipt with full banking responsibility and then to load the bonds onto the Euroclear exchange. This cannot be done if they do not have control of the instrument and supporting documentation. Furthermore, the transaction bank must be able to convey bonds to buyers at closing. Again, they cannot convey the bonds if they are being held by another institution.
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After fully meeting submission requirements, are any of the program procedures negotiable?
It is possible that some procedures may be modified, however, any proposed exceptions or deviations from the standard procedures outlined in the Prospectus would need to be submitted in writing and be reviewed and approved by at least the Program Facilitator and the transaction bank and perhaps also by the Buyer and by Euroclear attorneys. It will be difficult to change the standard procedures that have been negotiated with and approved by the attorneys of several entities.
Why is the program prospectus so long and detailed?
The international banking community and banking regulators require full disclosure of every aspect of the program for sophisticated investors and their attorneys to review. The document is prepared by lawyers and must be approved (1) by a reputable financial services firm (Deloitte Touché), (2) the transaction bank, (3) the potential buyers, and (4) the Euroclear exchange attorneys. All relevant information must be included in this document, including every conceivable potential risk.
Since my bonds are already located in a reputable storage facility in Europe, why do my bonds have to be put into safe-keeping in the transaction bank?
The transaction bank must secure the bond in their facility to issue a Safekeeping Receipt with full banking responsibility and then to load the bonds onto the Euroclear exchange. This cannot be done if they do not have control of the instrument and supporting documentation. Furthermore, the transaction bank must be able to convey bonds to buyers at closing. Again, they cannot convey the bonds if they are being held by another institution.
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TIMING
How long does the LTN purchase process take?
There are several purchase process factors for which there are no definitive allocations of time, such as: (1) prioritization of a specific bond in the queue, (2) speed of processing bonds in the queue [see note below], (3) identification of a specific buyer for a bond, (4) bond owner return of executed sales and purchase agreement (SPA), (5) bond owner delivery of bonds to be transacted. It is only after the SPA is executed and the bonds are delivered to the transaction bank that reasonable timing predictions can be made for the conclusion of the transaction: approximately 20 banking days.
[NOTE] Queue processing speed is also affected by the: buying appetite and financial capacity of institutional buyers, financial capacity of transaction banks, number of transaction banks, and timing of adding additional transaction banks.
After I submit my bond portfolio to SRM, how many bank days will it take . . . *
* For program review and registration of my submission?
It should take SRM no longer than five working days to review bond packages. When we determine that a package is complete, SRM then attempts to register the bond owner with the Program Facilitator. If there are no registration conflicts, the bonds are placed into the existing bond portfolio queue.
* To get to the top of the queue?
At the time of submission, each bond will be registered at the bottom of the queue and will be selected as the bonds above it are sold. While the portfolio queue is growing, the Program Facilitator also has a growing list of transaction banks and, as more transaction banks are engaged, the capacity to close more bonds at the same time will increase.
* To receive my prospectus?
We are unable to predict this this because issuance of the prospectus will depend on the completion of all the following: (1) In-take officer compliance approval, (2) Program Facilitator acceptance and registration, (3) Bond prioritization in the queue, (4) Selection of a buyer, and (5) Issuance and delivery of a Registered Prospectus. In addition, the timing of this task is dependent on the number of bonds in the queue at the time of submission.
After I sign and return my prospectus agreements, how long will it take to receive a Sale and Purchase Agreement (SPA)?
Once a bond is selected by a buyer, an SPA can be issued in about 5 banking days. After the bond owner accepts the terms and signs and returns the SPA, the transaction process will move rather quickly.
After I execute the Sale and Purchase Agreement . . . *
* How fast will I learn the location of the transaction bank?
The location of the transaction bank is revealed in the SPA.
* How quickly do I need to deliver my bonds to the transaction bank?
Immediately or within a few days. Once the SPA is written, bond delivery must be completed without delay and within a reasonable amount of time. Extended delay might cause the offer to be delayed or even cancelled.
* How long will it take to get a closing date scheduled?
Closing dates are not scheduled until (1) bonds are delivered to the closing bank, (2) a safe keeping receipt is issued, (3) the bond is backed with a cash value, and (4) loaded onto Euroclear. If all goes well this process can be accomplished in 15-20 banking days.
* How long will it take to close?
On the scheduled day, closing will only take a few hours at the transaction bank.
* How long will it take to receive my sales proceeds?
Settlement of sale proceeds is expected in 3 banking days.
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How long does the LTN purchase process take?
There are several purchase process factors for which there are no definitive allocations of time, such as: (1) prioritization of a specific bond in the queue, (2) speed of processing bonds in the queue [see note below], (3) identification of a specific buyer for a bond, (4) bond owner return of executed sales and purchase agreement (SPA), (5) bond owner delivery of bonds to be transacted. It is only after the SPA is executed and the bonds are delivered to the transaction bank that reasonable timing predictions can be made for the conclusion of the transaction: approximately 20 banking days.
[NOTE] Queue processing speed is also affected by the: buying appetite and financial capacity of institutional buyers, financial capacity of transaction banks, number of transaction banks, and timing of adding additional transaction banks.
After I submit my bond portfolio to SRM, how many bank days will it take . . . *
* For program review and registration of my submission?
It should take SRM no longer than five working days to review bond packages. When we determine that a package is complete, SRM then attempts to register the bond owner with the Program Facilitator. If there are no registration conflicts, the bonds are placed into the existing bond portfolio queue.
* To get to the top of the queue?
At the time of submission, each bond will be registered at the bottom of the queue and will be selected as the bonds above it are sold. While the portfolio queue is growing, the Program Facilitator also has a growing list of transaction banks and, as more transaction banks are engaged, the capacity to close more bonds at the same time will increase.
* To receive my prospectus?
We are unable to predict this this because issuance of the prospectus will depend on the completion of all the following: (1) In-take officer compliance approval, (2) Program Facilitator acceptance and registration, (3) Bond prioritization in the queue, (4) Selection of a buyer, and (5) Issuance and delivery of a Registered Prospectus. In addition, the timing of this task is dependent on the number of bonds in the queue at the time of submission.
After I sign and return my prospectus agreements, how long will it take to receive a Sale and Purchase Agreement (SPA)?
Once a bond is selected by a buyer, an SPA can be issued in about 5 banking days. After the bond owner accepts the terms and signs and returns the SPA, the transaction process will move rather quickly.
After I execute the Sale and Purchase Agreement . . . *
* How fast will I learn the location of the transaction bank?
The location of the transaction bank is revealed in the SPA.
* How quickly do I need to deliver my bonds to the transaction bank?
Immediately or within a few days. Once the SPA is written, bond delivery must be completed without delay and within a reasonable amount of time. Extended delay might cause the offer to be delayed or even cancelled.
* How long will it take to get a closing date scheduled?
Closing dates are not scheduled until (1) bonds are delivered to the closing bank, (2) a safe keeping receipt is issued, (3) the bond is backed with a cash value, and (4) loaded onto Euroclear. If all goes well this process can be accomplished in 15-20 banking days.
* How long will it take to close?
On the scheduled day, closing will only take a few hours at the transaction bank.
* How long will it take to receive my sales proceeds?
Settlement of sale proceeds is expected in 3 banking days.
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TRANSACTION
How large is the bond portfolio queue?
The queue of registered LTN packages is sizeable and growing steadily as additional portfolios are submitted and accepted. SRM's portfolio queue totaled 100 packages by end of September, 2020. The more highly prioritized and desired H-series bond portfolios make up less than half of the total number of registered bond portfolios.
Who are the buyers?
The Buyers are large financial institutions and international corporations, but the actual identity of these Buyers is confidential.
How many options are there for transaction banks?
Currently, there are two transaction banks approved with additional banks to come online soon.
Why is the transaction closing restricted to so few banks?
Bank attorneys must review and approve the prospectus and they must register with BCB to access the secured portal through which bonds are authenticated on a bank-to-bank basis.
Can the bond owner choose where his sales proceeds are delivered?
The bond owner’s sale proceeds will be quickly delivered to a secure account established in the bond owner’s name by the Program Facilitator. After the funds arrive in that “smart fund” account, the bond owner can move them to any location at their own discretion.
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How large is the bond portfolio queue?
The queue of registered LTN packages is sizeable and growing steadily as additional portfolios are submitted and accepted. SRM's portfolio queue totaled 100 packages by end of September, 2020. The more highly prioritized and desired H-series bond portfolios make up less than half of the total number of registered bond portfolios.
Who are the buyers?
The Buyers are large financial institutions and international corporations, but the actual identity of these Buyers is confidential.
How many options are there for transaction banks?
Currently, there are two transaction banks approved with additional banks to come online soon.
Why is the transaction closing restricted to so few banks?
Bank attorneys must review and approve the prospectus and they must register with BCB to access the secured portal through which bonds are authenticated on a bank-to-bank basis.
Can the bond owner choose where his sales proceeds are delivered?
The bond owner’s sale proceeds will be quickly delivered to a secure account established in the bond owner’s name by the Program Facilitator. After the funds arrive in that “smart fund” account, the bond owner can move them to any location at their own discretion.
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CLOSING
Why does the closing need to be in Europe?
The closing takes place at an approved and compliant transaction bank. Since Europe is where most of the critical operations of the Program Facilitator take place, all transaction banks are expected to be in Europe.
Can the seller select the county, city, and bank where the closing will take place?
No
Does the bond seller need to be present at closing?
No
Can the bond seller be present at closing if he wants to be present?
Yes
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Why does the closing need to be in Europe?
The closing takes place at an approved and compliant transaction bank. Since Europe is where most of the critical operations of the Program Facilitator take place, all transaction banks are expected to be in Europe.
Can the seller select the county, city, and bank where the closing will take place?
No
Does the bond seller need to be present at closing?
No
Can the bond seller be present at closing if he wants to be present?
Yes
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TRADE OPPORTUNITIES
Will the program facilitators offer any trade opportunities to me after closing?
Possibly.
Will SRM offer any cash-trade opportunities to me after closing?
Yes. Shortly after the date when bond owners receive their sale proceeds, SRM will request the bond owners to consider at least one or two different private cash-trade programs.
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Will the program facilitators offer any trade opportunities to me after closing?
Possibly.
Will SRM offer any cash-trade opportunities to me after closing?
Yes. Shortly after the date when bond owners receive their sale proceeds, SRM will request the bond owners to consider at least one or two different private cash-trade programs.
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LTN INFORMATION FORM
LTN INFORMATION FORM
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HOW TO WORK WITH SRM ON LTNS
What is SRM's LTN processing model?
SRM will work primarily with the consultant who introduced the LTN bond owner to us. We do not wish to engage more than one consultant in the process to ensure the requirements are clearly understood and any questions are relayed through the Introducing Consultant. All other consultants must be willing to step aside and allow SRM to work with the Introducing Consultant and/or directly with the bond owner or their legal representative.
How is SRM connected to the available LTN purchase program?
SRM does not have a relationship with the principals of this purchase program, but we do have a ten-year relationship with an LTN associate who is managing the portfolio queue for the purchase program that is available. Since 2013, this associate has been SRM’s mentor and primary access point to LTN programs. Over the past several years, SRM and our well-connected associate have worked together closely and just recently we have adopted a new LTN business model that permits our associate to focus his energies on providing intake services for LTN programs while SRM functions as the marketing arm and as the in-take desk for our associate. We are in daily contact, coordinating incoming files, discussing priorities and refining our LTN in-take system.
What is the compensation arrangement for consultants?
The official commission being paid by this purchase program will be much smaller than originally expected and it is already 100% taken. Now it is necessary for both SRM (representing the program-side consultants on the SRM LTN Team) and for any other consultants between SRM and the bond owner (client-side consultants) to arrange for compensation from the bond owner. This can be done jointly through an agreement known as a Profit-Share Agreement (PSA).
What PSA percentages does SRM feel is appropriate for consultants who provide services required for a successful transaction?
SRM believes the LTN world already is full of too many examples of greed and over-reaching by intermediaries. We have commonly seen examples of intermediaries asking for high percentage levels of compensation ranging from 20-50% of bond owners’ sale/trade proceeds. We feel that such compensation levels border on the obscene and take unfair advantage of bond owners for no apparent reason other than the greed of intermediaries. SRM believes that the total PSA compensation requested from a bond owner, for both program-side and client-side consultants, is reasonable if it stays within the range of 5-10% of bond owner proceeds. SRM also believes that the higher percentage levels in this range should only be requested if a large number of consultants are "actively" engaged/working on behalf of the bond owner.
What does SRM believe about the relative value of the contribution made by program-side consultants compared to client-side consultants?
Not surprisingly, and simply put, SRM believes that the major contribution is being made by the program-side consultants. In traditional financial transactions it is understood that, since it takes both a buyer and a seller, the facilitator bringing each respective side is making an “equal” contribution to the business effort. SRM does not believe this approach is relevant to LTN transactions. Anyone who has been involved with LTNs knows how “easy” it is to find an LTN owner who has been looking for years for a program solution and how “hard” it is to find an LTN program that works. Therefore, SRM believes that the party who brings the program to the table is the party who is making the bigger contribution—and that that party should be rewarded accordingly.
How many members are involved on the SRM LTN Team?
The SRM LTN team is made up of 4 parties whose primary functions are in the areas of administration, banking/paymasters, Portuguese communication and marketing.
What range of PSA percentages are requested by the SRM LTN team?
Depending on the circumstances of each potential transaction, SRM will request PSA compensation percentages ranging from 3-5% for the services provided by its team of 4 program-side members. SRM submits a bond owner's LTN package directly to the program in-take desk. We know how valuable this service is.
Will the PSA document that SRM creates request the bond owner to provide compensation for both program-side consultants and client-side consultants?
Yes. All client-side consultants will be signatories to the section of the PSA that indicates the commission amounts due to each consultant. Client-side consultants always have the option to have their own compensation agreement directly with the bond owner, however, if they make a separate compensation arrangement with the bond owner they will not be eligible to participate in any part of the compensation flowing from SRM's PSA.
How will the requested total PSA % amount be determined?
The total PSA % amount will be based on the total number of consultants involved in a transaction, including SRM’s program-side team of 4 plus the total number of all “working” client-side consultants. The total PSA % amount typically ranges from 5-10%, with 10% being the maximum PSA amount requested. SRM believes that consultant compensation should be modest and that a very high portion of transaction proceeds should stay with the bond owner.
How will SRM split PSA compensation with working client-side consultants?
After allocating the first 1% of the total PSA percentage to itself for providing the LTN program, SRM will then divide the remaining PSA percentage amount by the total number of consultants and allocate that percentage amount to each “working” client-side consultant on an equal basis.
How will SRM arrange for the payment of compensation to client-side consultants through its paymaster account?
SRM will prepare, or cause its paymaster to prepare, sub-fee agreements for all consultants based on the fee split percentages specified in a fee-sharing agreement referenced in the PSA. Consultants who wish to directly effect payment to a referral partner or to further divide their portion of the fees among their affiliates, are responsible for either (1) coordinating an additional sub-fee agreement with SRM's paymaster or for (2) designating to SRM's paymaster that their allotted fee portion should be paid to their designated sub-paymaster and then filing their own sub-fee agreements with their paymaster.
Will SRM provide some protection for consultant compensation?
Yes, but only a little. SRM will not make a formal submission of the bond owner’s bond portfolio to the LTN purchase program until the bond owner has signed and notarized the PSA. Having said this, SRM has no responsibility for payment of consultant compensation and cannot guarantee the payment of this compensation. Payment of PSA compensation is solely the bond owner’s responsibility and non-payment would be a legal matter between the bond owner and all consultants.
Will the LTN purchase program ensure the payment of PSA compensation to consultants?
No. PSAs with the bond owner are private agreements between consultants and bond owners. The purchase program will (1) pay the agreed upon sale proceeds to the bond owner, (2) pay out the small official commission (which is already 100% taken) and (3) have nothing to do with bond owner compensation to consultants through PSAs.
What if the bond owner is not willing to compensate either the program-side or the client-side consultants?
In this case, consultants requesting PSA compensation should politely help the bond owner understand that we will not work without compensation and that, if he does not wish to provide our compensation, then we will discontinue the program introduction efforts that we were prepared to make on his behalf.
What is the difference between a Working Consultant and a Referral Partner?
Working Consultants have performed recognizable work in the advancement of an LTN package. One should not expect to be considered a working consultant simply by having a business, employee, affiliate, family or friendship relationship with a consultant who performed the “work.” Working consultants are paid under the structure outlined in the PSA. Referral Partners are parties who provided to a working consultant a name, email address or phone number of a party who might assist in completing a transaction. Referral Partners are compensated by the working consultant to whom they provided their referral.
Why does SRM require a completed and signed Bond Package Summary & Genealogy?
The Bond Package Summary document helps provide SRM with information needed to prepare a Profit Share Agreement (PSA) for the Bond Owner to sign. For the available LTN Purchase Program, compensation to SRM and all client-side consultants who have not arranged a separate fee agreement with the bond owner is dependent on this PSA. Consequently, SRM requires a PSA signed by the Bond Owner before submitting an LTN package to this Purchase Program.
What is the Introducing Consultant designation?
The Introducing Consultant is the consultant who provides the first fully-compliant package to SRM for a bond owner which has then been submitted to and registered with the Program Facilitator. After the designation of Introducing Consultant has been granted to a consultant, any additional bonds that bond owner wishes to submit to this purchase program must be done through the services of the designated Introducing Consultant. The Introducing Consultant designation includes all consultants listed on the PSA that is issued when a bond owner is first introduced to the program. All subsequent submissions from that bond owner to that program must reflect the same consultant genealogy.
How does SRM handle duplicate introductions of the same bond owner?
SRM will begin by working with the first consultant who attempts to introduce a specific bond owner. This potential introduction is initiated by SRM’s receipt of a bond owner’s LTN package. If package documents are missing or need to be updated, the original introducing consultant will be given 30 calendar days in which to provide the documents that are missing or outdated so the package meets all submission requirements. During this package-completion time, if another consultant attempts to introduce that same bond owner, that second attempted introduction will not be recognized until the package-completion period is finished. If a second introduction occurs after the 30-calendar-day package-completion time, the first consultant will be notified of the second introduction and will be given 7 calendar days to submit the missing or outdated documents. If the first consultant does not produce a fully compliant LTN package during the 30-calendar-day or 7-calendar-day package-completion period, then the consultant who first presents SRM with a fully compliant LTN package from that bond owner will be recognized as the introducer of that bond owner. The designation as the introducer of a bond owner applies to all bonds that may be subsequently transacted by that bond owner through SRM. Any additional bonds will only be accepted if submitted through the recognized introducer for that bond owner.
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What is SRM's LTN processing model?
SRM will work primarily with the consultant who introduced the LTN bond owner to us. We do not wish to engage more than one consultant in the process to ensure the requirements are clearly understood and any questions are relayed through the Introducing Consultant. All other consultants must be willing to step aside and allow SRM to work with the Introducing Consultant and/or directly with the bond owner or their legal representative.
How is SRM connected to the available LTN purchase program?
SRM does not have a relationship with the principals of this purchase program, but we do have a ten-year relationship with an LTN associate who is managing the portfolio queue for the purchase program that is available. Since 2013, this associate has been SRM’s mentor and primary access point to LTN programs. Over the past several years, SRM and our well-connected associate have worked together closely and just recently we have adopted a new LTN business model that permits our associate to focus his energies on providing intake services for LTN programs while SRM functions as the marketing arm and as the in-take desk for our associate. We are in daily contact, coordinating incoming files, discussing priorities and refining our LTN in-take system.
What is the compensation arrangement for consultants?
The official commission being paid by this purchase program will be much smaller than originally expected and it is already 100% taken. Now it is necessary for both SRM (representing the program-side consultants on the SRM LTN Team) and for any other consultants between SRM and the bond owner (client-side consultants) to arrange for compensation from the bond owner. This can be done jointly through an agreement known as a Profit-Share Agreement (PSA).
What PSA percentages does SRM feel is appropriate for consultants who provide services required for a successful transaction?
SRM believes the LTN world already is full of too many examples of greed and over-reaching by intermediaries. We have commonly seen examples of intermediaries asking for high percentage levels of compensation ranging from 20-50% of bond owners’ sale/trade proceeds. We feel that such compensation levels border on the obscene and take unfair advantage of bond owners for no apparent reason other than the greed of intermediaries. SRM believes that the total PSA compensation requested from a bond owner, for both program-side and client-side consultants, is reasonable if it stays within the range of 5-10% of bond owner proceeds. SRM also believes that the higher percentage levels in this range should only be requested if a large number of consultants are "actively" engaged/working on behalf of the bond owner.
What does SRM believe about the relative value of the contribution made by program-side consultants compared to client-side consultants?
Not surprisingly, and simply put, SRM believes that the major contribution is being made by the program-side consultants. In traditional financial transactions it is understood that, since it takes both a buyer and a seller, the facilitator bringing each respective side is making an “equal” contribution to the business effort. SRM does not believe this approach is relevant to LTN transactions. Anyone who has been involved with LTNs knows how “easy” it is to find an LTN owner who has been looking for years for a program solution and how “hard” it is to find an LTN program that works. Therefore, SRM believes that the party who brings the program to the table is the party who is making the bigger contribution—and that that party should be rewarded accordingly.
How many members are involved on the SRM LTN Team?
The SRM LTN team is made up of 4 parties whose primary functions are in the areas of administration, banking/paymasters, Portuguese communication and marketing.
What range of PSA percentages are requested by the SRM LTN team?
Depending on the circumstances of each potential transaction, SRM will request PSA compensation percentages ranging from 3-5% for the services provided by its team of 4 program-side members. SRM submits a bond owner's LTN package directly to the program in-take desk. We know how valuable this service is.
Will the PSA document that SRM creates request the bond owner to provide compensation for both program-side consultants and client-side consultants?
Yes. All client-side consultants will be signatories to the section of the PSA that indicates the commission amounts due to each consultant. Client-side consultants always have the option to have their own compensation agreement directly with the bond owner, however, if they make a separate compensation arrangement with the bond owner they will not be eligible to participate in any part of the compensation flowing from SRM's PSA.
How will the requested total PSA % amount be determined?
The total PSA % amount will be based on the total number of consultants involved in a transaction, including SRM’s program-side team of 4 plus the total number of all “working” client-side consultants. The total PSA % amount typically ranges from 5-10%, with 10% being the maximum PSA amount requested. SRM believes that consultant compensation should be modest and that a very high portion of transaction proceeds should stay with the bond owner.
How will SRM split PSA compensation with working client-side consultants?
After allocating the first 1% of the total PSA percentage to itself for providing the LTN program, SRM will then divide the remaining PSA percentage amount by the total number of consultants and allocate that percentage amount to each “working” client-side consultant on an equal basis.
How will SRM arrange for the payment of compensation to client-side consultants through its paymaster account?
SRM will prepare, or cause its paymaster to prepare, sub-fee agreements for all consultants based on the fee split percentages specified in a fee-sharing agreement referenced in the PSA. Consultants who wish to directly effect payment to a referral partner or to further divide their portion of the fees among their affiliates, are responsible for either (1) coordinating an additional sub-fee agreement with SRM's paymaster or for (2) designating to SRM's paymaster that their allotted fee portion should be paid to their designated sub-paymaster and then filing their own sub-fee agreements with their paymaster.
Will SRM provide some protection for consultant compensation?
Yes, but only a little. SRM will not make a formal submission of the bond owner’s bond portfolio to the LTN purchase program until the bond owner has signed and notarized the PSA. Having said this, SRM has no responsibility for payment of consultant compensation and cannot guarantee the payment of this compensation. Payment of PSA compensation is solely the bond owner’s responsibility and non-payment would be a legal matter between the bond owner and all consultants.
Will the LTN purchase program ensure the payment of PSA compensation to consultants?
No. PSAs with the bond owner are private agreements between consultants and bond owners. The purchase program will (1) pay the agreed upon sale proceeds to the bond owner, (2) pay out the small official commission (which is already 100% taken) and (3) have nothing to do with bond owner compensation to consultants through PSAs.
What if the bond owner is not willing to compensate either the program-side or the client-side consultants?
In this case, consultants requesting PSA compensation should politely help the bond owner understand that we will not work without compensation and that, if he does not wish to provide our compensation, then we will discontinue the program introduction efforts that we were prepared to make on his behalf.
What is the difference between a Working Consultant and a Referral Partner?
Working Consultants have performed recognizable work in the advancement of an LTN package. One should not expect to be considered a working consultant simply by having a business, employee, affiliate, family or friendship relationship with a consultant who performed the “work.” Working consultants are paid under the structure outlined in the PSA. Referral Partners are parties who provided to a working consultant a name, email address or phone number of a party who might assist in completing a transaction. Referral Partners are compensated by the working consultant to whom they provided their referral.
Why does SRM require a completed and signed Bond Package Summary & Genealogy?
The Bond Package Summary document helps provide SRM with information needed to prepare a Profit Share Agreement (PSA) for the Bond Owner to sign. For the available LTN Purchase Program, compensation to SRM and all client-side consultants who have not arranged a separate fee agreement with the bond owner is dependent on this PSA. Consequently, SRM requires a PSA signed by the Bond Owner before submitting an LTN package to this Purchase Program.
What is the Introducing Consultant designation?
The Introducing Consultant is the consultant who provides the first fully-compliant package to SRM for a bond owner which has then been submitted to and registered with the Program Facilitator. After the designation of Introducing Consultant has been granted to a consultant, any additional bonds that bond owner wishes to submit to this purchase program must be done through the services of the designated Introducing Consultant. The Introducing Consultant designation includes all consultants listed on the PSA that is issued when a bond owner is first introduced to the program. All subsequent submissions from that bond owner to that program must reflect the same consultant genealogy.
How does SRM handle duplicate introductions of the same bond owner?
SRM will begin by working with the first consultant who attempts to introduce a specific bond owner. This potential introduction is initiated by SRM’s receipt of a bond owner’s LTN package. If package documents are missing or need to be updated, the original introducing consultant will be given 30 calendar days in which to provide the documents that are missing or outdated so the package meets all submission requirements. During this package-completion time, if another consultant attempts to introduce that same bond owner, that second attempted introduction will not be recognized until the package-completion period is finished. If a second introduction occurs after the 30-calendar-day package-completion time, the first consultant will be notified of the second introduction and will be given 7 calendar days to submit the missing or outdated documents. If the first consultant does not produce a fully compliant LTN package during the 30-calendar-day or 7-calendar-day package-completion period, then the consultant who first presents SRM with a fully compliant LTN package from that bond owner will be recognized as the introducer of that bond owner. The designation as the introducer of a bond owner applies to all bonds that may be subsequently transacted by that bond owner through SRM. Any additional bonds will only be accepted if submitted through the recognized introducer for that bond owner.
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Information About Brazilian LTNs > Informações Sobre LTNs Brasileiras
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Registered Business Address: 25 First Avenue SW, Suite A, Watertown, SD 57201
Mailing Address: 3210 Chestnut Glen Ln, Colorado Springs, CO 80918
Privacy Notice