Successful Syndicate Administration with a MBD

WealthForge recently connected with Michelle Wiens, Vice President of National Accounts at Capital Square, to discuss the benefits of outsourcing syndicate administration to a managing broker-dealer. Capital Square is a leading tax-advantaged real estate investment sponsor that to date has raised more than $2 billion in equity. Early on in its path to success, the firm asked WealthForge to serve as its managing broker-dealer, becoming one of our longest-standing clients.

When we asked Michele how she felt we were doing managing syndicate administration for Capital Square, she said she felt it was tough question to answer because of the hands-off nature of outsourcing:

“I think we’re really spoiled with how well WealthForge manages the syndication,” she said. “If I ever have a question and need to reach out to your team, even if someone is on vacation, I always get an immediate reaction. There's no misstep whatsoever, and I think that has helped Capital Square grow because it's something that we don't have to manage or track.”

She added that while Capital Square obviously keeps track of new firms that sign on to an offering, having WealthForge maintain all of their existing accounts would be difficult and expensive to manage on their own. Michele guessed it would probably take a staff of about six experienced professionals to tackle the same duties that they chose to outsource instead.

Our conversation with Michele suggested to us that this topic isn’t widely understood. Therefore we thought it would be helpful to explain what syndicate administration is and how a managing broker-dealer takes on that role for their clients.

Syndicate Administration Basics

Investopedia.com describes a syndicate as “a temporary alliance of businesses that joins together to manage a large transaction, which would be difficult, or impossible, to effect individually,” adding that “syndication makes it easy for companies to pool their resources and share risks.”

The necessary tasks and functions of syndicate administration in the alternative investment space typically entail:

• Conducting due diligence and background checks on syndicate members
• Reviewing all potential selling members for previous improper behavior. If a selling member that participated in a sponsor’s offering is found to have conducted themselves poorly, it could potentially invalidate an offering exemption.
• Checking firms’ licenses to ensure that they are licensed in the states for which they are selling a client’s product

Syndicate administration is, to a great degree, all about managing the risk that all participants in a transaction agree to share.

Supervising Selling Agreements

A selling agreement is a foundational contract between the managing broker-dealer and syndicate member that grants the syndicate member the right to sell the described offering. It also details the allowable fees and commissions of the offering as it pertains to the syndicate member and defines the representations and obligations of each party in regard to their role in the offering.

A managing broker-dealer distributes selling agreements for sponsor clients and keeps a record of all these agreements. They also produce reports that show which selling members participate in which offerings at any given time. The managing broker-dealer also works to ensure that those who sign the selling agreements for selling members are authorized to do so.

Managing Commission Payments

WealthForge makes commission payments to transaction participants twice a week to ensure that selling members are always paid in a timely manner. Because of this, a managing broker-dealer tends to become the selling members’ first point of contact for questions, which takes more burden off of the sponsor and allows them to focus their efforts more effectively.

Creating and Submitting Regulatory Filings

Syndicate administration for a managing broker-dealer also involves creating and submitting regulatory filings, including the 5123 filing for each offering, and distributing them to selling members who participate in the offering. This key task can also include submitting a Form D filing and any applicable blue sky filings.

Letting Sponsors Focus on Their Core Business

Michele Wiens says outsourcing syndicate administration to WealthForge has given her more time to focus on her role managing Capital Square’s relationships with broker-dealers, noting that it’s easier for her to travel and schedule meetings. She also says the partnership has generated mutual appreciation and respect that continues to result in positive outcomes:

“Outsourcing syndicate administration gives you an additional set of eyes. It provides an extra layer of checks and balances and more opportunities to reaffirm the correct way of doing things. We also feel that our success is WealthForge’s success and I feel that the WealthForge team really takes that to heart. When people ask me about working with a managing broker-dealer, it’s been easy for me to give them feedback, so I always recommend it and have steered people in that direction.”

Learn more about our syndicate administration package and other services that we offer as a managing broker-dealer.