Quick Answer
A placement agent, also called a dealer manager, signs a written agreement with the issuer that fixes its selling basis, usually firm commitment or best efforts. The offering documents fix the offering period, the window for soliciting sales, during which the agent gathers non-binding indications of interest from prospective investors.
This single agreement does three jobs at once: it names who is responsible for the offering, sets the clock that governs solicitation, and creates the record of investor demand the issuer and placement agent will later use to price the deal.
What Does the Placement Agent's Agreement With the Issuer Establish?
A placement agent, also called a dealer manager for the offering, enters into a written agreement with the issuer that fixes its selling basis, typically firm commitment or best efforts (covered in the distribution-methods section of this unit). That contractual basis determines who bears the risk of an incomplete sale.
What Is the Offering Period?
- Offering period: the window of time, fixed in the offering documents, during which the placement agent and any selling group members may solicit and accept subscriptions for the offering.
What Is an Indication of Interest, and When Does It Become a Sale?
- Indication of interest (IOI): a prospective investor's non-binding expression of interest in purchasing part of the offering, gathered by the placement agent during the offering period, before any sale is final.
Exam Tip: Gotchas
- An indication of interest is not a purchase and not a binding commitment. It becomes a sale only once the investor executes a subscription agreement and the issuer, or general partner, accepts it.
What Should You Check on Exam Day?
- Identify whether a fact pattern names the contractual basis, firm commitment or best efforts, fixed in the placement agent's written agreement with the issuer.
- Confirm the offering period is the window set by the offering documents, not an open-ended solicitation period.
- Recognize that an indication of interest is non-binding until a subscription agreement is executed and accepted.