Evaluation of DPPs
Chapters in this video
- 0:00 The economic soundness test and Riley's taco stand
- 1:17 Due diligence factors beyond economic soundness
- 2:35 Compensation caps: 15% vs. 10%
- 4:05 Pre-escrow compensation and non-cash comp rules
- 5:49 Limited partnership rollups and the 75% vote
- 6:33 The 2% solicitation cap and dissenting partner rights
- 7:33 Rapid-fire exam recap
What this video covers
- Why the economic soundness test requires a DPP to be viable completely independent of any tax benefits, and why tax write-offs alone can never justify a recommendation
- How to distinguish organization and offering expenses (15% cap) from total underwriting compensation (10% cap), and why the exam loves swapping these two limits
- What counts toward the 10% total underwriting compensation bucket, including sales commissions, wholesaling fees, due diligence expenses, finders fees, and consulting fees
- Why compensation before escrow release is prohibited, and what happens if a broker-dealer receives fees before an offering is fully funded
- The $300 annual non-cash compensation limit per person, plus which exceptions (occasional meals, training meetings) do not count toward that cap
- How limited partnership rollups work, why they require a 75% limited partner vote, and what protections dissenting partners must receive
- Why rollup solicitation compensation is capped at 2% of exchange value, and why compensation must be equal regardless of how a partner votes
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