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Wealth Professional | 13 Mar 2014, 11:10 AM Agree 0
Another lawsuit is launched against an ex-advisor who was convicted of bilking dozens of Canadian investors out of millions of dollars last November.
  • Mark | 13 Mar 2014, 12:00 PM Agree 0
    Not to defend this "advisor"s actions in any way, how can someone earning $20,000 annually qualify for anywhere close to $375,000 in loans? Shouldn't the lenders also be held responsible? Were the documents sent to the lenders vetted in any way? And if the investments were mutual funds, where were the compliance officers and oversight from the Mutual Fund Dealer? I sure would like to know more about how this was done. Perhaps a follow up article?
  • Heather | 13 Mar 2014, 12:15 PM Agree 0
    Since it was a leveraged investment, that usually means she used another asset to take the loan out to purchase the mutual funds. For example using a house. The banks now have plenty of security, plus the investments so she may have qualified for an interest only typle loan, and in that case her TDS (total debt service ratio) would have been fine. However Mark does have a point when it comes to the compliance side of this. There should be accountability on the side.
  • Mark | 14 Mar 2014, 09:46 AM Agree 0
    Heather, the problem is the article doesn't provide the details so we are just guessing. Some loans are 1:1, 2:1 or 3:1 using a client's money/investment to leverage the loan but this doesn't seem to be the case. This sounds like the loan or loans were funded 100% by the lenders which means she should have shown some assets, at least equal to the amount that she was borrowing if not more. The rules for some of these loans are now 1.5 net worth. Is it plausible that someone earning $20,000 annually part time owns a home worth close to $400,000? It could happen but it seems unlikely. We are just guessing here without all the details, however, even if the investor had the assets in place, the interest payments would have exceeded her disposable income. A $300,000 loan at a good interest rate of prime + 1% is over $1,000 monthly. I know some of these loans with mutual funds use the monthly distributions to pay the interest and a portion of the loan but given the risk that distributions could be reduced or even stopped which history has shown can happen, what lender would allow this amount of leveraging for this client? Again, it would help to have more details but along with the "advisor" being held to account, I would want to see everyone who allowed these loans to be approved to be held to account as well.
  • Tim | 05 Oct 2015, 05:36 PM Agree 0
    As part of this lawsuit the adviser lied about the assets and income ... The lending agency trust what is on the application is true and it was not
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