The Ontario Securities Commission (OSC) has ordered that a former mutual fund rep and life agent, and several others, be permanently banned from the markets and pay penalties for their role in an illegal distribution.

Last week, the OSC handed down permanent trading, registration and director & officer bans against Pasqualino Novielli, his wife, Zaida, and Brian Patrick Moloney, after it found that they participated in a fraudulent investment scheme that saw investors lose almost $1.7 million.

They were also ordered to pay $300,000 each in penalties, to collectively disgorge almost $1.7 million, and to pay over $200,000 in costs.

The sanctions come in the wake of an earlier hearing where the OSC found that they traded in the securities of Goldpoint Resources Corp. without registration, distributed Goldpoint securities without a prospectus, and made prohibited representations that Goldpoint securities would be listed on a stock exchange.

Ultimately, the OSC concluded that the trio “perpetrated a fraud on Goldpoint investors”, which raised $1,696,750 from over 110 investors, and that they violated the public interest. Only about 6% of those funds could be traced to Goldpoint’s projects or operating expenses, the OSC notes, while almost 90% was withdrawn by the respondents, or transferred to accounts they controlled to fund their personal spending.

As a result, OSC staff sought the permanent bans, disgorgement, $300,000 in penalties, and $257,368.89 in costs.

The OSC decision stated that Novielli did not object to the bans, and noted that he has no intention to trade in the future; but that the proposed monetary penalty is excessive.

The OSC panel sided with staff, granting the bans, saying that “the respondents cannot be trusted to participate in the capital markets in any way”; and calling for the disgorgement of all of the funds investors lost. It also said that “significant administrative penalties… are necessary to achieve the goals of specific and general deterrence.”

The OSC panel ordered that the three respondents pay most of the costs sought by staff, noting that it was not appropriate to order costs for time spent by staff members who played a minor role in the investigation or the litigation of the case, noting that they, while they did not obstruct the hearing, “they did not contribute to a more efficient or effective hearing which raised complex and important issues.”