Aggrieved investor must pay back loan, court finds

An investor who alleged that she was victimized by an unscrupulous mutual fund rep has been ordered by a court to repay her investment loan.

The Ontario Superior Court of Justice ruled in favour of B2B Bank, which had sued an investor, Maria Letrado Caro, and ordered her to pay back the $69,000 left on a $200,000 investment loan she took out from the bank in 2013. The court dismissed her defence and counterclaim alleging that the bank failed to protect her in granting the loan.

According to the court’s decision, the bank sought a summary judgment in its claim seeking to collect the unpaid balance of a loan that she agreed to, reportedly on the advice of a mutual fund rep, Neil Kumar, who worked for Shah Financial Planning Inc.

In 2019, Kumar was fined $250,000 and banned by the Mutual Fund Dealers Association of Canada (MFDA) for violating its rules by submitting falsified investment loan applications and failing to cooperate with the self-regulatory organization’s investigation.

In her defence, and in a counterclaim seeking $60,000 from the bank, Letrado argued that she assumed Kumar worked for B2B and that the bank should have known Kumar was borrowing money on her behalf and investigated him. She also argued that it breached its fiduciary duty or duty of care to her.

The court sided with the bank, granting summary judgment in its favour and dismissing the counterclaim.

Among other things, it found that Letrado didn’t provide any evidence for her assertion that she thought Kumar was working for B2B and that the bank should have known he was improperly advising her.

The decision also noted that Letrado settled a complaint to the Ombudsman for Banking Services and Investments (OBSI) against Kumar and Shah Financial for $25,000 and that B2B was not part of that complaint.

“The inference that the court can reasonably take from those facts is that Ms. Letrado did not believe, at the time of her complaint to the Ombudsman, that she had a complaint against B2B,” it said.

Ultimately, it concluded that “it is not open to the court on the evidence before it to find that B2B is responsible for the acts of Kumar and Shah Financial.”

It also found that there’s no basis for concluding that B2B owed a fiduciary duty or a duty of care to Letrado.

The court ordered that the investor pay the $69,090.92 still owed on the loan.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.