Tips For Choosing The Right EMD

Useful Tips on Choosing the Right EMD and

Importance of Due Diligence Conducted by EMDs for Investors

exempt markets High returns possible in exempt markets can easily lure investors but to make a successful investment investors need to utilize services of EMDs. EMDs have the required knowledge as well as experience to suggest right exempt products based upon your financial situation. As such our aim here will be to go through few of the details related to EMDs which will help you in selecting the right firm.

Choosing the Right Exempt Market Dealer (EMD)

Before appointing any particular EMD to work on your behalf you will have to get answers to some important questions. This will help you make sure that the exempt market dealer would be able to understand your requirements and work to safeguard your interest.

Are any of the offered products proprietary?

You need to be aware of the fact that if any EMD is creating as well as issuing any specific product then it can lead to conflict of interest. It is possible to an EMD will form a separate company and issue exempt products under that company's name. Such action will make it difficult to recognize any conflict of interests.

Solution?

The solution lies in checking that directors of company which is offering the products are not associated with the exempt market dealer. In case you find that the directors have such an association with the exempt market dealer then you should look for some other EMD.

What kind of due diligence exempt market dealer performs?

Oftentimes EMDs take assistance of 3rd party agencies to perform due diligence activities for them. In case details provided by such firms are followed with any checks then it can result in possible deficiencies.

Solution?

Best thing here would be that the EMD conducts proper screening procedure after details are received from such third party agencies to make sure due diligence has been performed as required.

How EMDs conduct due diligence?

A normal procedure for conducting due diligence consists of several steps such as:

  • Exempt market dealers generally conduct review of business model each of the companies have. As every company has its own rules and regulations, EMDs make proper inquiries so that the right firm can be selected.
  • EMDs also have to analyze the offering memorandum to ensure that all the information provided in it is correct. They also have the responsibility of tracing any possible gaps which can create problems for investors in future.
  • Another task EMDs need to perform involves financial review where capital allocation, fiscal history as well as usage details are checked and scrutinized. Apart from that, EMDs also analyze projects investment usage as well as check the capital sources. 

A Final Note

Thus as we can clearly see exempt market dealers play very crucial role in exempt markets and help investors in selecting right exempt products which will be suitable for them and provide them with desired returns on their investments.

Categories: Business and Management