A former fund rep who was named the sole heir of an elderly client’s estate will be able to keep his $1.8-million inheritance, but will also remain permanently banned from the industry.
In a unanimous ruling, the Superior Court of Justice dismissed appeals both from the former rep, Aurelio Marrone, and from the Ontario Securities Commission (OSC). The appeals concerned the enforcement case where Marrone was found to have breached securities rules when he was named as a client’s beneficiary.
In 2023, Marrone was permanently banned, fined $500,000 and ordered to pay $85,000 in costs after a regulatory tribunal found he failed to disclose conflicts of interest connected to his appointment as power of attorney, alternate executor and beneficiary of an elderly client’s estate. Marrone’s former dealer was IPC Investment Corp.
In the same ruling, the tribunal rejected the OSC’s request that Marrone be required to disgorge the $1.8-million inheritance he received from his former client.
Both sides appealed elements of that ruling to the court: Marrone appealed both the finding that he breached securities rules and the sanctions ordered against him, and the OSC sought to appeal the panel’s refusal to order disgorgement.
The court rejected all appeals.
Marrone’s appeal argued the OSC didn’t have jurisdiction to find that he breached the rules of the Mutual Fund Dealers Association of Canada (MFDA), and that the OSC could only address alleged breaches of securities law.
The court rejected that argument, finding the alleged breaches of MFDA rules and IPC’s policies amounted to a breach of a rep’s duty to deal fairly and honestly with clients under securities law. The court also noted that the OSC and the MFDA have concurrent and overlapping jurisdiction.
The court also rejected the argument that the tribunal erred in finding Marrone breached the rules, ruling that the tribunal’s conclusions were “grounded in law and logic.”
Marrone’s $500,000 fine was also upheld, with the court saying the amount “was within an acceptable range and based on a principled analysis of the aggravating factors and circumstances of this unique case.”
The OSC’s cross-appeal argued the tribunal erred in refusing to order Marrone to return his inheritance.
“[The OSC] submits that the only inference that could be drawn from the facts was that Mr. Marrone being named beneficiary was the result of his accepting a [power of attorney], becoming an alternate executor and failing to properly address the conflicts of interest that arose from those events,” the court said.
The court disagreed, saying this wasn’t the only inference that could be drawn from the facts. Further, “we note that there was considerable evidence before the merits panel, which the panel was in the best position to weigh,” the court said.
The court ordered $15,000 in costs to the OSC on the original appeal, and $5,000 in costs to Marrone on the OSC’s cross appeal.