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Mr. Chan is a financial adviser with First National Bank Ltd. Tom had $500,000 to...

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Finance

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. Toms $250,000 investment is now worth only $100,000.
  • OEL is being sued for $100 million. It has since gone into liquidation (bankruptcy) and Tom has lost its $250,000.

Advise Tom.

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