Investing

Is this ad too good to be true?

  • Last Updated:
  • Nov 15th, 2017 10:56 am
[OP]
Deal Addict
Oct 29, 2010
4218 posts
596 upvotes

Is this ad too good to be true?

My parents just shared this ad with me from the National Post which kinda seem too good to be true on first sight.

The ad promises 9.75% per year on a 5 year term which is paid monthly, there is a minimum investment of 25k and it's only available to qualified investors in the province of Ontario.
The website in there is www.meadowbankasset.com and it says the issuer is Firebird Asset Finance Inc.
I tried to follow up on some of the information on the ad and it feels even more fishy than first sight as I couldn't really find much and their website seem completely new and barely operational with little to no information.
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15 replies
Deal Fanatic
User avatar
Apr 16, 2006
5972 posts
383 upvotes
flafson wrote:
Nov 11th, 2017 4:25 pm
My parents just shared this ad with me from the National Post which kinda seem too good to be true on first sight.

The ad promises 9.75% per year on a 5 year term which is paid monthly, there is a minimum investment of 25k and it's only available to qualified investors in the province of Ontario.
The website in there is www.meadowbankasset.com and it says the issuer is Firebird Asset Finance Inc.
I tried to follow up on some of the information on the ad and it feels even more fishy than first sight as I couldn't really find much and their website seem completely new and barely operational with little to no information.
If something seems too good to be true, it probably is.

I'd be very skeptical about contributing any money in this case.
Deal Addict
Jan 20, 2016
1771 posts
736 upvotes
Houston, TX
Why so low?
Private mortgage investment clubs used to ad 12% few years ago :)
You can buy NYMT and get 12-14% with more guarantee imo...
Make the Trudeau drama teacher again!
Sr. Member
Nov 6, 2015
640 posts
243 upvotes
Guelph, ON
It's 3x as high as the best 5-year GIC. When something is multiple times higher than it's competition, it's always a scam of some sort.
Newbie
Sep 16, 2017
26 posts
4 upvotes
It didn't say if the principle is guaranteed. If it is, it is a scam. If not, it is possible.

But I guess OP assumes principle is guaranteed.
[OP]
Deal Addict
Oct 29, 2010
4218 posts
596 upvotes
denglili0001 wrote:
Nov 12th, 2017 2:14 am
It didn't say if the principle is guaranteed. If it is, it is a scam. If not, it is possible.

But I guess OP assumes principle is guaranteed.
The ad makes it sound like a GIC type investment but it doesn't really talk about protections or anything like that other than the fact you do have some.
So I'm sure most people will look at it and think it's a fixed investment though it feels more like than a high risk equity type investment.
Penalty Box
User avatar
Dec 13, 2016
2052 posts
1528 upvotes
It looks legit.

What could go wrong?

You will likely make a lot of money.

No risk involved.

Hard cash paid monthly.

A smart way to invest.
Member
User avatar
Oct 14, 2015
426 posts
108 upvotes
1 - look for a statement similar to this in the fine print: "interest payments may be suspended indefinitely at discretion of management".

2 - I doubt that principal is guaranteed. If it is, the contract should say so.

3 - these kind of deals are common when the top is already behind you.

Just one example of many in Alberta.
The pitch sounded great: acres and acres of land in the heart of Alberta’s booming real estate market. Sure it was just raw farmland, but just imagine all those fields filled with residential communities and retail developments and even hotels and golf courses. And with a profit to investors after only five years -- with a rate of return of 6 or 7 per cent -- who wouldn’t buy in?

And thousands did just that. Promoters raised almost a quarter of a billion dollars. Some of it came from people like Wanda Anderson who borrowed the money to do it. “We were so encouraged to. It was pay out your mortgage and have a nest egg to retire on and everything was going to be beautiful.”
The rest of the story: http://www.ctvnews.ca/w5/w5-investigate ... -1.1463419
If readers can't do anything with the content of a topic other than argue about it, it does not belong here.
Deal Expert
Aug 2, 2001
15022 posts
5290 upvotes
This looks like the usual mortgage investment.

You are providing loans and mortgages to businesses because they cannot obtain them at similar rates through traditional lenders. Why did traditional lenders turn these people away? There is a variety of reasons. The big question would be, what do these businesses put up as collateral for the loans. Are you the second mortgage? Is there no collateral?


Without reading through I assume the risk is that one of the loans/mortgages are not paid and goes into foreclosure. Companies like this tend to try and mitigate this by holding a large number of loans / mortgages and limiting the exposure of each to the entire fund.


My personally opinion is, after investing in these funds before, I would be cautious because even if the investments are legitimate the people behind them sometimes are not. You can invest in real estates and mortgages through more secure means.
Deal Addict
Feb 4, 2015
3512 posts
789 upvotes
Canada, Eh!!
Many folks in investment arena would be happy with 7-8% yearly returns and yet this ad promising 9.75%... too good to be true or at least with some risk not being highlighted
Deal Fanatic
Jul 1, 2007
8044 posts
880 upvotes
How does the company repay its investors in 5 years? With the money taken from new investors?
Money Smarts Blog wrote:
Nov 29th, 2010 11:18 am
I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Deal Fanatic
May 31, 2007
5000 posts
2109 upvotes
They've been in trouble before with the OSC (securities commission), found on google:

Background

1. Meadowbank Asset Management Inc. (Meadowbank) has been registered in Ontario in the categories of Investment Counsel and Portfolio Manager since October 11, 2006. It obtained registration as a Limited Market Dealer on January 16, 2007.

2. OSC staff attended the premises of Meadowbank on February 14, 19 and 20, 2008 to conduct a compliance field review. During the review OSC staff found that Meadowbank had not been calculating its minimum free capital in accordance with requirements of the subsection 107(3) of the General Regulation (the Regulation) under the Securities Act (the Act). Similarly, Meadowbank did not maintain proper books and records as required under section 113(3)(10) of the Regulation.

3. As a result staff’s findings in the compliance field review, OSC staff advised Meadowbank by letter dated February 21, 2008, that they would recommend terms and conditions be imposed on Meadowbank’s registration.

4. On March 6, 2008, Meadowbank requested an Opportunity to be Heard (OTBH) by the Director pursuant to subsection 26(3) of the Act. The OTBH was conducted through written submissions.


http://www.osc.gov.on.ca/en/9439.htm

Too risky for my liking.
Deal Fanatic
May 31, 2007
5000 posts
2109 upvotes
Some more:

5. On February 14, 2008, OSC staff attended the premises of Meadowbank to conduct a compliance field review of Meadowbank. The review covered the period from February 1, 2007 to January 31, 2008. Following standard procedure, OSC staff conducted an opening interview with Rawn Lakhan, President, Chief Executive Officer, and Ultimate Responsible Person for Meadowbank and Charles Bastyr, Chief Investment Officer, Portfolio Manager and Chief Compliance Officer for Meadowbank.

6. During the opening interview OSC staff asked whether Meadowbank had ever been capital deficient. Mr. Lakhan responded that Meadowbank had not met the minimum free capital requirements for four to five months of the review period. Meadowbank did not report the capital deficiency to the OSC and Mr. Lakhan said he was not aware of the reporting requirement. In addition, he understood that free capital requirements only applied at the fiscal year-end for the firm.

7. OSC staff reviewed the monthly capital calculations prepared by Meadowbank and found that they had not been calculated in accordance with requirements of the Act. Meadowbank had calculated the excess or deficiency in minimum free capital by comparing the ending cash balance in the firm’s bank account to its required capital. Moreover, Meadowbank was not able to provide copies of monthly financial statements, trial balance and general ledger.

8. OSC staff provided Meadowbank with 48 hours to prepare minimum free capital calculations. On February 15, 2008, Meadowbank provided OSC staff with capital calculations supported by trial balances for the review period. The calculations demonstrated that Meadowbank met the free capital requirements as at February 14, 2008 and throughout the period of the review.

9. Counsel for Meadowbank submitted that the firm has revised its policies and procedures to ensure its monthly capital calculations are completed in a timely manner. Meadowbank has also enlisted the assistance of an external accountant to verify its monthly capital calculations.

10. Counsel noted that Meadowbank is still in the start up phase of its operations and has not yet provided advice to any external clients. In addition, since Meadowbank was never in a capital deficient position, terms and conditions would be unduly harsh. Counsel suggested an undertaking as an alternative.

Suitability for Registration

11. OSC staff consider three criteria in determining whether an applicant is suitable for registration: proficiency, integrity and financial solvency.

12. The failure to make monthly capital calculations and to maintain proper books and records is an important factor in determining the continuing suitability of a registrant. This failure raises concerns in relation to the criteria of proficiency and financial solvency.

13. Financial statements and capital calculations based on these statements are the principal tool used by the OSC to monitor a registrant’s financial viability. The experience of OSC staff has been that failure to maintain these statements can be indicative of a serious underlying financial problem with the registrant.

Decision

14. All registrants are required to maintain proper books and records and to meet the capital requirements at all times and not just at year-end. This is a serious regulatory obligation placed on registrants.

15. When these obligations are not met, OSC staff has regularly recommended that terms and conditions to monitor the financial situation of the firm be imposed on its registration. Only in rare circumstances would this course of action not be followed. Meadowbank’s concern that the terms and conditions will be posted on the OSC website is not a persuasive reason to not impose monitoring terms and conditions.

16. Therefore, I have determined that the terms and conditions as set out in Schedule A should be imposed on the registration of Meadowbank. Also, Meadowbank must continue to meet all requirements under the Act that apply to it as a registrant.

April 21, 2008
Newbie
Nov 27, 2017
2 posts
I saw the ad on the weekend myself at Financial Post on Saturday.
I decided to give them a call to get some information to see if this is, actually, a real product.
From what I understand, Meadowbank Asset Management is the dealer or the seller of the product.
Firebird Asset Finance Inc is the issuer of the notes/investment.

Firebird was created in May 2016 and is currently redesigning their website to make it more user-friendly. This could explain why we are all having a hard time finding information about it. I found out that Phoenix Corporate Finance Inc. is the parent company for Firebird Asset Finance inc. It has raised capital and operates in the similar manner and has been around for 4 years and has a well functioning website with some of their past deals.
I had asked them regarding the return guarantee.
From what I understand, in regards to the OSC, they are not allowed to put "returns are guaranteed" as the product is not issued by a traditional financial institution and is not CDIC insured. The investor will receive the defined returned based on the length of subscription. It is not a scenario where one year you could get 9.75% and next you get 5%. The reasoning behind this is that if at an event of Firebird's bankruptcy, the government is not going to step in and cover the principal amounts for the investors.

I also did some further research on Meadowbank itself.
Looks like they had an encounter with the OSC back in 2008.
However, it looks like some sort of an oversight and everything has been cleared/straightened out. When going on to the OSC website, regarding the 2008 incident with Meadowbank, this is the first this that pops up "[Update: The terms and conditions imposed by the Director in this decision were removed as at October 31, 2008.]"
I have spoken with the CEO of the company regarding this. He said he would be more than happy to provide the documentation regarding this issue

The interest rate of 9.75% does seem a bit skeptical, but the product itself might actually be real. I am going to obtain further information in regards to all the risks associated with this investment and go from there.

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