What Are Direct Access Notes?

By Tracy Lum , last updated January 10, 2012

Direct Access Notes (DANs) are a form of financial investment vehicle offered to the public directly by a corporation or firm. DANs can take the form of bonds or stocks. They can also be sold by a broker.

Direct Access Notes provide a way for the issuing firm or corporation to raise money quickly. DANs were more popular prior to the great recession and financial crisis.

LaSalle Broker Dealer Services created its Direct Access Notes program, which sells corporate notes. It also launched a Direct Access Bonds program in 2005 to sell the municipal debt of the city of Chicago.

Ally Bank currently advertises its Demand Notes as having a higher rate of return and a low minimum initial investment of $1000. Moreover, note holders can access their funds at any time. The notes are unsecured debt, and only individuals associated with Ally, GM, or GMAC are able to obtain Demand notes. The notes are only available by prospectus.

One firm that issued DANs in 2007 is the Tennessee Valley Authority, which sold TVA electronotes. These notes were rated by credit-rating agencies as AAA/Aaa and were exempt from state and local taxes. In addition, the notes had different maturities, ranging from one to 30 years. The bonds were not insured by the federal government.

UPS is another example of a firm that sold DANs. UPS issued UPS Notes, which matured after a period of at least nine months.

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