January 21, 2013
Partner Laura Paglia comments on fiduciary responsibility specifically as it relates to higher-risk leveraged investing in an article for Law Times. Below is an excerpt of the article.
It’s no secret that leveraged investing is risky, but that doesn’t mean advisors across the country have stopped employing the strategy. A panel of lawyers, however, suggests thinking twice about going the leveraged route with a client.
Clearly, leveraging is a volatile issue, especially in downward markets, but while it’s risky for clients, it can also pose problems for advisors, as lawsuits often follow complaints.
“The top complaints involve suitability of leveraging,” said Laura Paglia, a partner at Torys, at the Association of Canadian Compliance Professionals’ annual compliance conference on Monday. “From July 1, 2006, to June 30, 2007, the MFDA had 25 suitability complaints regarding leveraging and 50 complaints regarding suitability at large.”
“The client will come in and go on and on that they didn’t understand what they were investing in,” says Paglia. “Part of that is true. This type of sophisticated client is used to hiring people. He says ‘I hired you, I write the check, and I’m not really going to pay attention.’”
For the full article, click here.