3.10.2. Program Organization
The DPP’s organizational structure and experience is also important to understand. The DPP may or may not have a prior operating history. If it has a history, investors should examine how well it has fared. If it has no history, investors should know who will manage the DPP. Perhaps it is someone from inside the sponsor’s organization. Perhaps one of the general partners is a business entity that does have considerable experience. Or perhaps the DPP has hired an independent entity to manage the operation. Hopefully whoever will be in charge is someone who has some operational history that can be evaluated.
Fees and Commissions. Another critical aspect of an organization’s operation is its compensation practices. Fees and commissions abound throughout the DPP’s life, from the time it is first being offered to its termination, and an investor would do well to know how they compare with other operations of its type. Fees related to the initial offering of a DPP include:
• dealer-manager fees paid to the broker-dealer that manages the offering
• selling commissions paid to the dealer-manager who directs it to participating broker-dealers
• organization and offering expenses—costs of organizing and selling the offering, such as:
» issuer expenses paid for with offering proceeds, including overhead costs
» underwriting compensation paid to member firms and registered representatives engaged in soliciting, marketing, and selling program securities
» due diligence expenses