Series 82: 1.1.2.1.5. Placement Agent Compensation

1.1.2.1.5.  Placement Agent Compensation

The underwriting compensation is typically set as a percentage of sales, usually between 2% and 10% in total. In a private placement, there may be a syndicate, but it is much less common. Instead, the placement agent operates as the manager of a selling group of broker-dealers who try to sell the securities. This deal manager typically receives a fixed percentage of sales, while the selling group members receive a fee or concession for the securities that they sell. The deal manager and the selling group members may be partially paid in warrants for the shares they sell. For example, a selling group member may be given one warrant for every 10 shares it sells. Warrants are typically issued at a price slightly higher than the issuing price (e.g., 125%). Selling group members do not take on the risk of any unsold shares. As long as the private placement is conducted on a best-efforts basis, the deal manager does not take on the risk of unsold shares either.

The placement agent may not include a firm that is not a FINRA member in the selling group (or syndicate, if used). The selling group members must als