Following a contested hearing, the MFDA found that Arthur Pretty breached know-your-client and suitability requirements by recommending leveraged strategies to unsophisticated investors without properly explaining the associated risks. The Panel accepted expert evidence that “leveraged strategies using return of capital mutual  funds are likely to be suitable only when the investor is sophisticated, has a long investment horizon, a very high risk tolerance, very aggressive investment objectives, understands the risks of leverage and has back up sources of income and net worth.” (ArthurGeorge Pretty (Re), File No. 201128))