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Mr. Chan is a financial adviser with First National Bank Ltd.Tom had $500,000 to invest. Tom hired Mr. Chan to advise on some appropriate investments.
- Mr. Chan is a financial adviser with First National Bank Ltd.Tom had $500,000 to invest. Tom hired Mr. Chan to advise on some appropriate investments. Mr. Chan advised Tom to put $250,000 into Vic Properties Ltd (VPL) and $250,000 into Oil Explorers Ltd (OEL). Tom paid Mr. Chan $2,500 for his advice. Tom invested $250,000 in VPL immediately.However, he only invested in OEL after making some enquires from an oil expert.
If Mr Chan had made the proper enquires he would have found that:
- Because of the downturn in the property market VPL is expecting to make a large loss. Y's $250,000 investment is now worth only $100,000.
- OEL is being sued for $100 million. It has since gone into liquidation (bankruptcy) and Y has lost its $250,000.
Advise Tom.
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