Partnership in the Private Markets: “Who Pays?”

Way back in March 2020, our values as a company were tested.  At the time, I began to write this blog post but with my schedule, I totally forgot to complete it. But, with recent events, I felt it was important to publish.

 

With companies in any sector, you are approached for partnership opportunities and in most cases, the partnership is a win-win when each company stays in its lanes.  When partnerships get really muddy is when there is a financial gain for one party at the expense of another or the clients they serve.

 

Our potential partner had a great service that we, as a company, were happy to send introductions to. After many meetings and demonstrations, the CEO reached out to discuss a partnership.  We provided an overview of our ecosystem, our governance standards, and our ethics, and explained that since its inception, our company has had no financial relationship with any of our KorePartners anywhere in the world. This did not stop this CEO from offering us an incentive to send their firm business, which we respectfully declined.  Our response was and remains: “We are happy that you provide this service, and we want you to provide the best service to our clients and all we ask in return is you take good care of them, and do your very best”.

 

The response was shocking:  “I can’t partner with a company that is not financially motivated to send me business”.  We respond, we understand that is how this business might have been done in the past but today it’s different for many reasons.

 

First, we are in a regulated sector. That means the securities regulators monitor all activities by Issuers (companies), Investors, Broker-Dealers, and Internediarities who are participating in a regulated offering for private companies.

 

As an example of how securities regulators monitor and catch those who try to circumvent the rules to get rich, on 30 September 2022 the SEC charged six individuals and two companies for a fraudulent scheme to promote securities in a RegA offering. Some of the charges were for failing to disclose precisely the kind of payment we declined to accept two years ago.

 

On 03 October 2022, the SEC charged influencer and celebrity Kim Kardashian for failing to disclose she was paid a fee to promote a cryptocurrency.  She was paid $250,000 USD to promote a company and the fine issued by the SEC was $1.26M and included a 3-year ban from promoting any crypto asset securities.  

 

You would think with these two SEC announcements, everyone would be reviewing their programs to make sure they are onside with regulators and more importantly, ethical and transparent to the clients we serve.

 

BUT NO!!!

 

On 07 October 2022, many of the Broker-Dealers and intermediaries were offered a carrot via email to be rewarded up to $13,000.00 USD by a provider if they brought them a client.  

 

So who actually pays these premiums?

 

The answer is very simple: the Client “Issuer (Company)”.  Make no mistake–it will be the client paying for this big incentive fee because it will ultimately come out of the proceeds of the raise. 

 

Will this fee be disclosed to the client?  Will both parties disclose their finders fee in this regulated transaction?

 

You may be thinking this is how it’s always been done, so why are we all spending so much time disrupting the current way things are?   

 

Because there is a better way.

 

We need to conduct ourselves the same way we are telling the current establishment that they should behave. Sometimes disruption of the old ways is good. New innovations (and the revival of some good old ones) are disrupting the world in so many areas, including banking, insurance, auto, and capital markets. The JOBS Act was aimed at democratizing capital, and a big part of this was making it safer for new investors

 

So let’s not stop with just how they operate; let’s also disrupt the way we conduct ourselves in operating our companies. Let’s strive always to conduct ourselves more ethically, more transparently, and always compliantly 

 

We at KoreConX never have and never will take any type of fees from anything, anyone, or any company for something we have not created.  We have many partnerships with companies that see how a relationship can be formed that becomes a win-win: the better they serve the clients we introduce to them, the better we look, and the more people will want to use our platform. Our clients need to know we’re serving their interests when we point them at a KorePartner, not sending them to the highest bidder for their business. 

 

Most of our KorePartners find this is actually to their own advantage; they know that when we recommend them to a client, it’s because they’re the best equipped to meet that particular client’s needs. 

Everyone wins when the client wins.

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