While the MFDA continues to police advisors using leverage inappropriately, SRO suggests things aren’t nearly as bad as they once were.
WP recently ran an article
about a PEI mutual fund salesperson who was banned from performing any securities related activities for MFDA members for a period of 10 years. The veteran advisor used a derivation of the Smith Manoeuvre to generate almost $1.4 million in mutual fund sales from a total of 15 different clients.
The move was profitable for the former Investia Financial Services mutual fund salesperson who likely netted more than $10,000 annually from the leveraged investment scheme.
This level of abuse got WP wondering whether leveraged investment schemes such as the one run by Lloyd Snyder are more or less prevalent today than in the past. MFDA Managing Director of Enforcement, Hugh Corbett, was kind enough to take the time Thursday to address the issue.
“You can fancy it up any way you want,” says Corbett, “but at the end of the day you’re telling investors to borrow against their house and invest those proceeds… and that’s really what gets them in trouble.”
Snyder’s version of the Smith Manoeuvre ultimately relied on the willingness of clients to borrow against their homes. Corbett says the MFDA has little tolerance for deceptive practices by the advisors it licenses.