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MFAA Prosper : Mortgage and Finance Brief 11
48 | Mor tgage & Finance brief Legal Facing the Tribunal The latest cases before the MFAA Tribunal – and the decisions reached. Words Phil Naylor The situation: When renewing his MFAA membership, a broker disclosed that one of his lender accreditations had been cancelled for a reason other than volume. Attached to his renewal was a detailed explanation of the circumstances leading to the cancellation. What had happened? He had obtained funding from a lender for a commercial project for a company acting on behalf of a unit trust. With the exception of one major interest, he did not disclose to the lender that there were a number of other interests in the unit trust, including his own investment trust. After the loan was granted, he advised he had become concerned about the major interest’s compliance with various obligations pursuant to the loan, eg failure to provide the lender quarterly financial reports, and decided to advise the lender of the existence of the other interests in the venture. The loan was placed in the lender’s credit management unit, the broker’s trail commissions were ceased and his accreditation cancelled. 1 CASE The case for the defence: He told the investigating officer he had reservations about not advising the lender of the existence of the other investors, but had been instructed by the major interest not to do so and the major interest’s legal advisers had indicated they were willing to provide a letter to the lender advising that their client was the sole owner of the property. The Tribunal’s decision: The Tribunal decided that the member’s failure to disclose to the lender he was a shareholder in the venture was in breach of the MFAA Code and, as such, constituted misconduct. However, it formed the view that the primary motivation of the member was a misplaced desire to be of assistance to his client, whereas he should have recognised he had professional obligations to both his client and the lender. The Tribunal took into account his early admission of wrongdoing, his decision to advise the lender of his earlier conduct, his loss of accreditation with the lender and the fact that he sold his finance broking business to fund the cost of litigation that he and the other investors were engaged in, against the major interest. He was formally censured, and the Tribunal accepted an undertaking from him that he would not work in the finance broking industry for three months.
Mortgage and Finance Brief 10
Mortgage and Finance Brief 12