After she encouraged clients to take out loans and buy investments that turned sour, the Mutual Fund Dealers Association (MFDA) has prohibited Jacqueline De Backer from conducting securities related business for one year, and ordered her to pay a $10,000 fine.

Between 2006 and 2011, Jacqueline De Backer was registered with FundTrade Financial and its successor company, FundEX Investments. In a settlement agreement released last week, the MFDA revealed that she frequently recommended and facilitated the implementation of a leveraged investment strategy: clients used their home equity to take out investment loans and then put the proceeds into return of capital (ROC) mutual funds. The income from the ROC funds was supposed to cover the interest on the loans, but problems developed after the stock market crash in 2007. When the mutual funds were unable to maintain their monthly payouts, clients had to pay out-of-pocket to cover the amounts they owed.

Failed to generate sufficient returns

"The Respondent failed to ensure that the Clients understood the risk that the ROC Funds might reduce, suspend or cancel the payment of the monthly distributions in the event that the ROC Funds failed to generate sufficient returns due to market conditions and other reasons, such that the investments could not be relied upon to pay the costs of the investment loans associated with the Leveraged Investment Strategy," reads the document published by the MFDA.

De Backer voluntarily resigned her registration in November 2011. The MFDA notes that she has not been registered since that time.