Be cautious when handling exempt-market products advises one financial educator, after a retired Ontario fund salesman was caught recommending the products behind his firm's back.
Christiaan Hesselink, a former FundEX Investment Inc. salesman, was fined $400,000 by the Mutual Fund Dealers Association of Canada (MFDA). According to the MFDA, Hesselink invested about $8.4 million from 58 clients and 18 other individuals in two exempt market investment products between October 2007 and April 2011, without approval from FundEX.
“It’s bad for him, bad for the clients and bad for the industry,” says Jim Yih, owner of Retirehappyblog.ca “From a client perspective, it’s important that the advisors are working through their dealers or a regulatory body. If not, than they (advisors) may not be covered under errors or omissions. You have to go through the rigours.”
According to Yih, exempt-market products are attractive because they promise a high rate of return, better than traditional investments. Despite this, he recommends making sure clients read the fine print carefully before making a decision.
“Exempt-market products are becoming increasingly trendy. They're unique, they're different, they're complicated,” he advises. “There is a lot of stuff hidden in there. They have to be dealt with on a case-by-case basis with more checks and balances; more scrutiny.”
In addition to the fine, Hesselink, who retired from the industry in 2013, is banned from conducting securities-related business for five years and must pay $7,500 in costs.