Placement Agent

A placement agent is a third party intermediary in an investment transaction that acts as the party that raises the capital for an investment fund seeking to raise capital or a specific company seeking to raise capital. The placement agent is, in this sense, the independent contractor salesman for the company or fund seeking to raise money. Or, to be even more pointed and direct, the word “place” is a euphemism for “sell;” so, placement agents are salesmen of equity to consumers, and the consumers are usually wealthy individuals or groups that can take on the risk of buying the equity. The placement agent solicits, on behalf of the fund or company, potential investors to invest their money in the fund or company. The placement agent adds value by using its network of contacts, which the fund or company may not have, to find viable investors. Placement agents, just like all brokers in the United States, must comply with broker-dealer registration requirements. Placement agents often assist in fundraising efforts by putting on investor road shows for the solicitation of new, potential investors; putting together promotional materials; and even drafting up, with the advice and assistance of legal counsel, offering documents, including private placement memoranda (PPMs). Placement agents are typically compensating by taking a percentage of the total amount raised for the investing company or fund.