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When Is a Confirmation of Principal Required?

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When Is a Confirmation of Principal Required?

Short Answer

A Confirmation of Principal is required anytime a transaction involves an introduction, intermediary, mandate, or broker, and the bank must formally establish who the true Principal Party is.

It is a clarity and protection document, not a formality.

✅ Situations When It Is Required

🔹 1. When an Intermediary or Broker Makes an Introduction

If a transaction is introduced by:

  • A broker

  • A mandate

  • An intermediary

  • A consultant or representative

The Confirmation of Principal is used to:

  • Identify the true Principal

  • Confirm the introducer is not the Principal

  • Prevent multiple or conflicting claims

🔹 2. Before the Bank Communicates Beyond the Introduction

Once an introduction is made, the bank cannot continue unless it knows:

  • Who it is legally dealing with

  • Who has authority to proceed

  • Who controls the transaction

The Confirmation of Principal authorizes the bank to move from:

Introducer → Principal-to-Bank communication

🔹 3. When Privacy Must Be Enforced

Because U.S. Capital Private Bank operates as a Private Bank and Trust, it cannot disclose:

  • Principal information

  • Transaction details

  • Bank communications

to brokers or third parties without written confirmation from the Principal.

The document enforces that privacy boundary.

🔹 4. Before Fees or Commissions Are Recognized

If any intermediary claims a fee or commission:

  • The Principal must acknowledge it in writing

  • The bank must confirm payment terms

  • Fees must be tied to successful closing only

The Confirmation of Principal:

  • Prevents fee disputes

  • Prevents unauthorized claims

  • Protects the Principal from surprise obligations

🔹 5. Before Issuing Sensitive Documents or Instruments

The Confirmation of Principal is commonly required before:

  • RWA (Ready, Willing & Able) issuance

  • Bank-to-bank correspondence

  • SWIFT pre-advice or transmission

  • Instrument issuance (LC, SBLC, BG, MTN)

This ensures the bank is acting only on instructions from the rightful party.

🔹 6. When There Is Any Risk of Multiple Principals

If there is a possibility that:

  • More than one party claims to be the Principal

  • Instructions may conflict

  • Authority is unclear

The Confirmation of Principal locks the structure and prevents escalation or rejection by compliance or risk departments.

❗ When It Is NOT Required

A Confirmation of Principal is generally not required when:

  • The client was sourced directly (no intermediary)

  • The bank already has a clear Principal relationship

  • No third party is involved in the introduction

🧠 In One Sentence

The Confirmation of Principal is required whenever a transaction is introduced by a third party and the bank must formally establish who the true decision-maker and beneficiary is—before proceeding.

🔗 How It Fits With Other Documents

The Confirmation of Principal works together with:

  • The Smart Plan Agreement

  • Bank-to-bank procedures

  • RWA and SWIFT workflows

Each document serves a different protection purpose.

📞 Need Clarification?

If you’re unsure whether your transaction requires a Confirmation of Principal, our team will confirm it quickly.

Email: [email protected]
Website: https://uscapitalprivatebank.com
Phone: +971 52 992 6005

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