Section: 3 Initial Public Offerings (IPOs)

Sub Section: 3 Placement Agents

Placement agents are typically the brokerage firms and securities dealers that specialize in buying and selling of securities. They have a dedicated sales and trading team that is an expert in selling securities to individual and institutional investors and have strong relationships with them. Underwriters either decide to sell to the investors directly or they might opt to utilize the expertise of placement agents.


The dealer agreement or selling agreement is the agreement in which securities dealers/brokers, who are not part of the syndicate, are contracted to purchase some of the securities from the issue. The underwriters may not be able to locate enough purchasers for the issues. They may then approach other securities dealers and see if they may want to participate. These other securities dealers may have even been offered a chance to participate as an underwriter but chose not to. What these other securities dealers can do is help move the product (the securities) to the general public. Basically, they provide another distribution channel. However, these securities dealers don't have any risk at all as the Dealer Agreement or selling agreement will allow these dealers to purchase the securities at a discount from the offering price in order to fill order they may have gotten after the effective date from their clients.