Your mutual fund advisor asks you for a loan for a business venture she is working on. She says that she will pay back the principal in two years and pay you 4.5% interest a year. What should you do?
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CORRECT!
Under MFDA Rules, advisors are not allowed to accept loans from clients as this is considered a conflict of interest. It is never appropriate for your mutual fund advisor to ask you for a loan. In fact, your advisor has to avoid any irreconcilable conflict of interest. Other conflicts of interest that are not appropriate include an advisor lending money to clients. In addition, mutual fund advisors may not act as a power of attorney for a client or as estate trustee under a client’s will.
