Financial intermediary bankrupted by liability claim

Hey financial mediator, what hat are you wearing to what conversation?

What is the practice? Accountants and financing intermediaries call investing clients to provide financing to SME clients of the same firm. A great form to finance SMEs and real estate investors, but … what hat do you wear to what conversation? Who is the customer? And what do you do if that investor does not obtain his principal or interest in full? After all, we are in a mild recession with falling real estate prices. Are you then sure that as a two-hatted mediator you are not liable for that investor’s write-off and a claim falls on your doormat? Your professional liability insurance does not cover these damages.

Well, the chances of such a claim arising may not be high, but if it does happen and the claim is justified, the damage is incalculable. And fair is fair: Why shouldn’t the claim have merit? That investor trusted you and your office. After all, you are the expert. And you said it was good…Let’s all be keen on this to minimize walking around with two hats. My advice:

• Communicate & document: Ensure transparency to all parties involved. Explain clearly what you are doing and make sure there are no discrepancies between what you say verbally and what you put in writing.
• Work together: in doubt about your own independence, liability or knowledge & expertise? Engage an additional party.