A principal broker in British Columbia is reviewing a proposed syndicated mortgage investment. The offering memorandum details that the funds will be used to finance the acquisition and development of a remote recreational condominium project, where similar projects in the area have seen slow sales. As part of their supervision duties, which risk should the principal broker be most concerned about regarding the investor's exposure?

Question: A principal broker in British Columbia is reviewing a proposed syndicated mortgage investment. The offering memorandum details that the funds will be used to finance the acquisition and development of a remote recreational condominium project, where similar projects in the area have seen slow sales. As part of their supervision duties, which risk should the principal broker be most concerned about regarding the investor's exposure?

Answer options: ✅ Concentration risk due to the single-asset focus and limited exit strategy.

• The personal creditworthiness of the individual investors involved.
• Regulatory compliance issues with FINTRAC reporting.
• The principal broker's personal liability for the construction defects.

Correct answer: Concentration risk due to the single-asset focus and limited exit strategy.

Explanation: Concentration risk arises when a significant portion of capital is allocated to a single asset or project, especially one with high marketability challenges, increasing the potential for substantial losses if that project performs poorly.