A manager opens a PAMM Account with TradeFCM. The manager is earning a steady profit, but he is having trouble attracting new investment.
An TradeFCMclient offers to help the manager find new investors. The manager accepts his offer and makes the client his Acquisition Partner, agreeing to award him 10% of the compensation earned from each client he refers to the account.
The Acquisition Partner refers two investors: Investor 1 and Investor 2. Having accepted the manager's terms in his Proposal, the investors will pay the manager 20% of their share of the profits as compensation.
Over the course of the one-month trading interval, the manager achieves a 50% return. The overall balance of the PAMM Account is now 150,000 USD.
Here's how the compensation is paid out:
A manager opens a PAMM Account with TradeFCM and recruits an Auxiliary Partner to help him out with risk analysis. The Auxiliary Partner will earn 10% of the manager's compensation from investors.
Two investors join the manager's PAMM Account, accepting the terms in the manager's Proposal. They will pay the manager 20% of their share of the profits on the account.
The manager earns a 50% return on his trading for the one-month trading interval. The balance of the PAMM Account rises from 100,000 USD to 150,000 USD.
So here's what happens:
Here's how our scenario plays out:
The Manager agrees with his partners on their compensation:
In his Proposal, the manager stipulates that each of the investors in his account will pay 20% from their share of the profits as compensation.
The Acquisition Partner brings in two investors to the PAMM Account: Investor 1 (who invests 50,000 USD) and Investor 2 (30,000 USD). Auxiliary Partner 1 refers Investor 3 (10,000 USD) to the account. Investor 4 joins the account on his own, investing 20,000 USD. The PAMM manager has 5,000 USD of his own money invested in the account.
In this example, the overall balance of the PAMM Account starts out at 115,000 USD.
At the end of the one-month trading interval, the PAMM Account has achieved a return of 50%. The balance has risen from 115,000 USD to 172,500 USD.
Here's how much each of the Investors has earned in profits:
Compensation from Investor 1
Having earned a profit of 25,000 USD for the month, Investor 1 will pay a total of 5,000 USD (20% of 25,000 USD) in compensation. The partner who referred Investor 1 is paid first. The Acquisition Partner gets 10% of the 5,000 USD, or 500 USD. Next, the Auxiliary Partners are paid from the remaining 4,500 USD in compensation. Auxiliary Partner 1 takes 900 USD (20%). Auxiliary Partner 2 takes 450 USD (10%). The remaining amount (3,150 USD) goes to the manager.
Compensation from Investor 2
Investor 2 pays out a total of 3,000 USD in compensation, 20% of the 15,000 USD he earned for the month. From the 3,000 USD, 300 USD (10%) will go to the Acquisition Partner. From the remaining 2,700 USD, Auxiliary Partner 1 is paid 540 USD (20%) and Auxiliary Partner 2 is paid 270 USD. The manager gets the remaining 1,890 USD.
Compensation from Investor 3
Investor 3 will pay a total of 1,000 USD in compensation. The partner who referred him will be paid first - in this case, the Acquisition Partner. Out of the 1,000 USD, 100 USD (10%) is paid out to the Acquisition Partner, leaving a total of 900 USD. Auxiliary Partner 1 will also be paid for their auxiliary role in the account. As such, the Auxiliary Partner 1 is paid 180 USD (20% of the 900 USD) for this role. Auxiliary Partner 2 gets 90 USD (10%). The manager takes the remaining 630 USD.
Compensation from Investor 4
Since Investor 4 joined the PAMM Account on his own, there is not an Acquisition Partner that needs to be paid. From the 2,000 USD he pays in compensation, Auxiliary Partner 1 takes 400 USD (20%) and Auxiliary Partner 2 takes 200 USD. The manager gets the remaining 1,400 USD.