The Mutual Fund Dealers Association of Canada remains concerned about misleading leverage disclosure in the fund industry.

In a notice published today, the MFDA reports that its staff continues to, “note issues with respect to misleading statements made by members, [registered reps] and loan providers or intermediary entities involved in the marketing of leveraged strategies.”

Examples of such misleading communications include: suggestions that leverage is appropriate for all clients; promises to clients to “make your mortgage tax deductible”; recommendations for the use of borrowed funds with “no additional risk”; projections that presume unrealistic returns or feature overly optimistic examples; and, statements that promise returns but provide no disclosure or inadequate disclosure of downside risk or potential negative returns.

Dealers and reps are “cautioned against making or including misleading statements such as these in their own sales communications or other materials provided to clients.”

Also, it says that when a rep becomes aware that a client has received misleading information regarding leverage through some other source, they, “should take steps to make the client aware of the risks involved in borrowing to invest.”