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Bulletin #0160-C

Misleading Communications Regarding Investment Loans by Loan Providers

Mutual Fund Dealers Association of Canada
Association canadienne des courtiers de fonds mutuels
121 King Street West, Suite 1000, Toronto, Ontario, M5H 3T9
TEL: 416-361-6332 FAX: 416-943-1218 WEBSITE:

Contact: Karen McGuinness
BULLETIN #0160 – C

Vice-President, Compliance
August 18, 2005

Phone: 416-943-5897

MFDA Bulletin
For Distribution to Relevant Parties within your Firm

Misleading Communications regarding Investment Loans By Loan

MFDA staff has become aware of communications sent by affiliated financial institutions
of fund managers to MFDA Members, which promote investment loans in a manner that
is misleading and contrary to the best interests of investors. The communications sent by
the fund manager affiliates advertise investment loans as like “inheriting cash” or
“finding cash” and state that “there is no upper limit on the amount that can be
borrowed”. The loans are described as “no margin loans” and are available only if the
clients invest in the mutual fund of the affiliated fund manager. These communications
typically promote the merits of leveraging strategies for clients while not mentioning the
attendant risks.

Members and Approved Persons are reminded of the requirements of MFDA Rules 2.2.1
and 2.6 to ensure that recommendations to clients with respect to leveraging are suitable
and that a risk disclosure document be provided to clients when recommendations with
respect to leveraging are made.

MFDA staff has notified the provincial securities regulatory authorities of these
communications for their consideration of the fund manager’s role in promoting such
activity that appears to be contrary to the best interests of investors.

MFDA Rules 2.2.1 and 2.6

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