There has been a change in regulation that presents many Alternative Investments in a form that may appear today as "approved" and "transparent" under the new registration requirements of National Instrument 31-103. This in many ways has given a false level of comfort that these investments are good. This blog was set up for the purpose of reviewing, comparing and openly discussing the various investments being offered via the Exempt Market Dealers across Canada.
Reviewing the OM, please pay special attention to Sections 1,2 and 3. It is clear that Omniarch lends funds to a related company of Jay Modi's and the purpose here is to skirt the disclosure issues. As funds are lent from Company A to Company B there is no requirement into disclosing what Company B is using the funds for as long as the 12% interest is being paid. Essentially Jay could do anything with this money and as long as he manintains the payments you really dont know what he spent it on. You can't even tell if he is paying the 12% from the same funds raised. He can buy the RMBS but the yield is significantly lower and realistically, I don't buy any ratings agency today after what has happened in 2008. What is more surprising is the compensation disclosure, notice the use of proceeds has no deductions but 11% is actually deducted for commissions and administration. Then there is the "Hidden" disclosure where it tells you that Jay and Arti Modi receive $5,000 per annum for every $1M raised over $11M. Well if they raised $100M they would receive $445,000 per year each. Not bad for couple of young kids that flipped a few houses and bought some land in Sylvan Lake, Alberta. What is alarming is that this is compensation based on the raise and not on performance so regardless of what they return since they raised the funds they are entitled to the salary. Not exactly fair to the investor. So here is the quick and dirty as I review, every $100,000 you invest only has $89,000 being lent of which you are recieving 10% return and so it looks good so far but what about Jay and Arti's salry and administration expenses and if you invested thru Olympia trust for your RRSP then you have additional deductions. Furthermore you are locked in for 5 years with little liquidity, have you seen the run on the banks? Once more then 15% of the investors redeem, how is Jay Modi going to return the funds? There is no doubt this model is a good model but its a great model for Jay and Arti Modi not the investor. There are other investments which don't bleed you for fees and paying someone a salary for raising money is not exactly what I call an ideal investment.
Reviewing the OM, please pay special attention to Sections 1,2 and 3. It is clear that Omniarch lends funds to a related company of Jay Modi's and the purpose here is to skirt the disclosure issues. As funds are lent from Company A to Company B there is no requirement into disclosing what Company B is using the funds for as long as the 12% interest is being paid. Essentially Jay could do anything with this money and as long as he manintains the payments you really dont know what he spent it on. You can't even tell if he is paying the 12% from the same funds raised. He can buy the RMBS but the yield is significantly lower and realistically, I don't buy any ratings agency today after what has happened in 2008. What is more surprising is the compensation disclosure, notice the use of proceeds has no deductions but 11% is actually deducted for commissions and administration. Then there is the "Hidden" disclosure where it tells you that Jay and Arti Modi receive $5,000 per annum for every $1M raised over $11M. Well if they raised $100M they would receive $445,000 per year each. Not bad for couple of young kids that flipped a few houses and bought some land in Sylvan Lake, Alberta. What is alarming is that this is compensation based on the raise and not on performance so regardless of what they return since they raised the funds they are entitled to the salary. Not exactly fair to the investor. So here is the quick and dirty as I review, every $100,000 you invest only has $89,000 being lent of which you are recieving 10% return and so it looks good so far but what about Jay and Arti's salry and administration expenses and if you invested thru Olympia trust for your RRSP then you have additional deductions. Furthermore you are locked in for 5 years with little liquidity, have you seen the run on the banks? Once more then 15% of the investors redeem, how is Jay Modi going to return the funds? There is no doubt this model is a good model but its a great model for Jay and Arti Modi not the investor. There are other investments which don't bleed you for fees and paying someone a salary for raising money is not exactly what I call an ideal investment.
ReplyDeleteGreat blog! Any updates on the exempt market?
ReplyDelete