Hereinafter following the business model, edited by Attorney-at-Law, Esquire S.M. from Munich, in it's original form.
Contractual and legal aspects to a participation in
best investment in the money market
A participation is done through a big Swiss bank and
is accompanied by a big Trust Firm
Here a business model is described, that allows investors to participate in best investment deals, otherwise exclusively privileged to institutional and investors with “deep pockets”. Under this business model investors dispose of an amount of investment funds of one hundred thousand Euro (€ 100.000) or more to participate. Participations in best investment take place in the money market. Thereby the key objectives for investors are to achieve (1) a best return on investment, i.e. to maximise the profit potential, whilst preserving the (2) highest security, i.e. not incurring any losses or depletion of the investment funds under any circumstances and (3) highest liquidity with a (4) fast availability of funds. In addition to these criteria, investors sponsor with their participation in best investment - without contributing financially - the promotion of a supraregional medical centre, including a vitally needed humanitarian project. The latter consists of a medical hospital, specialising in orthopaedic surgery, as well as general medical services, both stationary and ambulatory.
Best investment participations are as of the set-off made to these specific requirements
– highest security, highest liquidity, best return on investment and fast availability of funds –
as they take place in the interbank money market.
Through his personal experience the principal hereto has contacts to financial intermediaries, accredited by big Swiss banks. He is prepared, in cooperation with a big Trust Firm, to put these contacts at the disposition of prospective investors, desirous of participating in this, otherwise privileged, best investment upon their demand.
By appointing a big Trust Firm to accompany these participations it is ascertained, that investment funds are administered in strict conformity with the underlying Trust Agreement and moreover the instruction letters of the participating investors. In monthly periodical intervals investors are permitted to inspect all account and auditing statements with an international auditing firm.
II. The business model
(1) Choice of Law
In principle it should be said, that the business model, described herein is not bound to the jurisdiction of a certain country. There is no legal or tax wise advantage in making use of the one versus the other jurisdiction. Herein the applicable law results from the location of the banks involved, which is Switzerland, and the business provision by the financial intermediaries. As the latter are active in Switzerland, Swiss Law lies at hand and is recommended.
(2) The business parties
The business model is based on the co-operation of the three participating parties, inter-related by contractual agreements. None of the parties is in any way isolated from the others nor excluded to any information. This is the essential element of transparency in this structure. The three parties are;
(a) the principal hereof – through a single purpose company in representation of all the participating investors – and the trust firm, both overseeing and documenting all transaction activities on behalf and for account of the investors,
(b) the Financial Intermediary, accredited by contract by a big Swiss bank, and
(c) the big Swiss bank.
(3) The contractual agreements
The following diagram illustrates the contractual relationships among the three parties:
Big Swiss Bank
Account Management Instructions Agreement on parameters of co-operation
& Instruction Letter
Principal & Trust Firm Financial Intermediary
Funds Management Agreement
Through the contractual agreements by and between all three parties, a reciprocal relationship is created. In order to understand one single of these contractual relationships, one must have knowledge of the content of the other contractual agreements. This economical concept of contracts reduces the content of all contracts to an absolute minimum and negates repetitions.
(a) Contractual agreement by and between the principal and the Financial Intermediary:
Before the principal proceeded in any constructive way whatsoever with this business and by acquiring potential Clients (investors), the corporate counsel of the corporation of the principal and Esquire S.M. of Munich, Attorney-at-Law, investigated in-depth on:
the Financial Intermediaries, the position and relationship thereof with the big Swiss banks, the business itself, the inter-relationships, the contractual agreements and adhering documents among the three parties, as well as the position of and the department, which the Directors of the banks oversee, who are in charge of the businesses, the clients (investors) and the accounts of the clients of the Financial Intermediaries. The corporate counsel and Esquire S.M. from Munich investigated and worked hereon more than 6 weeks. This work comprised, however, was not limited to, bank internal check-ups, inquiries with international supervising authorities and agencies with regards as to possible wrongdoings and or incidents of the Financial Intermediaries as well as to financial services licensing in the relative country or as to whether no licensing requirements would be applicable, based on the “passive financial services rendering on request of an Investor”, as per the regulations of the German Federal Supervisory Board for Financial Services Rendering (BAFin). Of this in-depth investigation by the corporate counsel of the principlal and Esquire S.M. of Munich, Attorney-at-Law, it resulted, that nothing whatsoever hinders or objects the ratification of the contracts by and between the principal and the Financial Intermediaries. However, this is subject to either (1) existing ratified agreements by and between or (2) the disposition of big Swiss banks to readily sign agreements with the Financial Intermediaries. Subject to the ratification of a contract by and between the principal and the Financial Intermediaries, the principal also issues Powers-of-Attorney for the management of financial assets for Financial Intermediaries in favour of the Financial Intermediaries - a standard document of big banks - enabling the Financial Intermediaries to engage the banks on behalf of the principal to complete the underlying businesses or investment objectives.
(b) “Agreement on parameters of co-operation” by and between the banks and the Financial Intermediaries:
Before any Swiss bank engages in any co-operation together with independent Financial Intermediaries, the latter will be subject to a thorough investigation process. This process is initiated by the requirements as per the Swiss Law & Regulations, under which any Financial Intermediary must comply with in order to obtain the necessary permits and or licenses. The requirements are as per the;
Federal Law on Stock Exchanges and Securities Trading (BEHG)
as well as the
Regulations on Stock Exchanges and Securities Trading (BEHV)
Art. 10 to 19 of the above Law (BEHG) as well as Art. 17 to 28 of the above Regulations (BEHV) provide a whole series of requirements, which not only must be complied with in order to obtain the permit as a securities trader, but these are elementary requirements by and for to obtain a co-operation with Swiss banks. For cause, the banks are not merely interested in seeking co-operations exclusively together with reliable and properly licensed Financial Intermediaries, due to their reputation. Moreover, the banks are obliged under Art. 9 of the Bank Regulations to care for an efficient Risk Management, which includes also the Limitation of Risks. The banks will not expose themselves to the risks and perils of a co-operation with non-licensed Financial Intermediaries and/or of bad record/reputation, as in doing so, the banks expose themselves to possible investigations by the Supervisory Authority - i.e. the Federal Banking Commission (EBK) - and assume the risk of loosing their own licenses.
Based hereon, the banks require the following series of documents from Financial Intermediaries, which the latter must provide before any talks on a possible co-operation will be engaged into:
- Permits/Licenses by the Authorities,
- Certificate of Registrar (max. 1 year old),
- list of holders of proxy,
- copies of passports of the individual consultants and Managing Directors,
- CV’s of the latter,
- Business & marketing plans,
- Audit reports & prospectuses.
Subject to (1) the provision of all of the above documentation to the full content of & (2) the result of the subsequent negotiations being of certitude, that a co-operation will be successful, (3) the banks will ratify together with such Financial Intermediaries “Agreements on parameters of co-operation”, mentioned in the diagram above. The latter describe among guidelines on proceedings, also rules for the protection of clients. Attention is drawn especially to Articles 3 and 11 therein, which oblige the Financial Intermediaries to extensive informative duties towards their client(s) (here the principal, representing all the Investors participating AND the Trust Firm); in the event the Financial Intermediaries do not properly fulfil these informative duties, the banks reserve themselves the right in doing so.
Under point 9 of this “Agreement” explicit reference is made to the official licensing of such Intermediary. However, this is merely of declarative character, as the requirements by law have to be complied with. It should be noted, that the banks will care utmost for that the Swiss Law will absolutely be complied with. Moreover, the Financial Intermediaries are obliged to keep with the norms of all jurisdictions under which their activities come. As such and as described under Article 9 of the “Agreement”, the regulations of i.e. the German Federal Supervisory Authority for Financial Services Rendering (BAFin) apply to Financial Intermediaries, advising and rendering services to clients in Germany, although their business activities are carried-out in Switzerland.
(c) Agreement by and between the principal and the Banks:
The Agreements by and between the principal and the banks are not evidenced in a single contractual agreement, but in a series of account management instructions, tailored to fit the individual clients’ needs and requirements. As an example to the intended investment, the principal will give instructions to the banks with reference to the quality of paper to be permitted for trading, in order for the banks to issue and do the purchase, investment and or placement order(s) of the Financial Intermediary at all! The underlying paper, permitted for trading, must, as evidenced in the Deed of Trust, ratified by and between principal and the Financial Intermediary, be of a minimum credit rating of A+, as per Standard & Poors, which ascertains the value during the relatively short period of trading. Complementary thereto the principal issues an Instruction Letter direction to the respective big Swiss bank, which restrains the Power of Attorney, issued in favour of and direction to the Financial Intermediary, to the extent and type & quality of paper, as described therein. The Instruction Letter of the principal is issued on the grounds of the Instruction Letters of all investors, participating in a best investment deal. Every participating investor issues such an Instruction Letter as part of the Trust Agreement, ratified by and between the principal and all participating investors. Moreover, the Instruction Letter obliges the big Swiss banks to (1) supervising the correct use of the funds, (2) full Information on Risk and (3) safeguarding Client’s Interests, notably (a) value preservation, (b) not to incur any losses, and (c) to generate investment income!
This Instruction Letter does, among others, not object to the “Agreement” by and between the Financial Intermediary and the respective bank, in specific therein under point 2, paragraph 3! The big Swiss bank does not supervise the transactions of the Financial Intermediary! However, the bank is generally instructed by the principal to permit and do only specific transactions! The content of the Instruction Letter with respect as to the management of his account (with two signatories, i.e. the principal and the Trust Firm) and deposit (investment funds of all investors participating) is at the sole discretion of the principal and has “per se” nothing to do with the Agreement by and between himself and the Financial Intermediary.
Only point 1 of the Power of Attorney, issued by the principal in favour of the Financial Intermediary, is restrained by the Instruction Letter. In addition thereto, the Instruction Letter is in conformity with Art. 3 of the Deed of Trust by and between the principal and the Financial Intermediary and assures it’s careful performance!
The Instruction Letter is legitimately evidenced in Art. 13 “Special Conditions in favour of End-Clients” in the “Agreement” by and between, here in this case UBS and the Financial Intermediary. It shall be mentioned, that the proposal to such Instruction Letter comes from the big Swiss banks directly. And, as such, the Financial Intermediaries approve the content of the Instruction Letter!
The present dissertation is merely intended as a basic outline of the investment opportunity of the principal. It does in no way implement to be of absolute character but serves as a quick overview on the parameters. It should serve as a basis for discussion and bring forth queries by the interested parties (investors).
No in-depth consideration has been given herein to the paper (bank obligations), traded in best investment in the money market, which, however, under the present structure does exclude a loss of the investment funds. This shall be left to be elaborated during a personal meeting by and between the principal and the investors, interested in participating in best investment.
Munich, May 2015