A hearing panel of the Toronto-based Mutual Fund Dealers’ Association of Canada (MFDA) has fined former financial advisor, Paul Yoannou of Ontario, $6 million for the misappropriation of client funds.
The MFDA investigation into Yoannou began in September of 2012. Originally, the MFDA alleged that Yoannou, who worked for Winnipeg-based Investors Group Inc. at the time, had misappropriated nearly $12 million from 55 clients between February 2006 and July 2011. That amount was reduced to $6 million to reflect the former advisor’s guilty plea to15 counts of fraud over $5,000 in a criminal action in February 2013.
“This is one of the largest if not the largest [cases of] fraud before the MFDA,” said Francis Roy, enforcement counsel for the regulator. Roy also added that the multi-million dollar penalty is one of the largest fines ever levied by the MFDA.
Yoannou is currently serving a six-year prison sentence and neither he nor his lawyer was present at the MFDA hearing. Yoannou has also declared bankruptcy.
According to MFDA documents, Yoannou told clients that he was investing their money into one of four different investment programs that were approved by Investors Group. In reality, Yoannou deposited the money into his personal banking account.
Investors Group has compensated some clients; however, others have not received any money back. A family member of one of Yoannou’s former clients who was present at the hearing said her mother has not received any of the $300,000 she invested with Yoannou because the investment was considered to be off-book.
In addition to misappropriating client funds, the hearing panel also found that Yoannou failed to comply with the MFDA investigation. During the investigation period, the MFDA contacted Yoannou several times to participate in an interview and provide relevant documents, said Roy, however the former advisor declined through his legal counsel to respond to any requests.
As such, the hearing panel fined Yoannou an additional $50,000 for his failure to comply with the investigation. Yoannou must also pay $7,500 in costs and is permanently banned from registering with the MFDA.