In a September 6, 2012 press release, MFDA announced disciplinary proceedings would commence in respect of Paul Yoannou, a former mutual fund salesman.

At that time, MFDA staff alleged he engaged in the following conduct, contrary to the by-laws, rules or policies of the MFDA:

Allegation #1: Between at least February 2006 and July 11, 2011, the Respondent misappropriated at least $7,221,398.97 from 40 clients and at least $4,358,500 from 15 other individuals, thereby failing to deal fairly, honestly and in good faith with the clients and engaging in a business conduct or practice which was unbecoming or detrimental to the public interest, contrary to MFDA Rule 2.1.1.

Allegation #2: Commencing on or about July 28, 2011, the Respondent has failed to attend an interview to provide a statement and to produce documents and records as requested by MFDA Staff during the course of an investigation, contrary to section 22.1 of MFDA By-law No. 1.

The MFDA’s reasons for decision document says Yoannou was served with the notice of hearing, but didn’t appear at the hearing held on October 30, 2012.

It adds that following this absence, the MFDA panel ordered the hearing on the merits would instead take place on March 19, 2013 in Toronto. However, the hearing was then adjourned to April 25, 2013.

The MFDA document says, “The Respondent failed to file and serve a reply, and he did not attend the hearing on April 25, 2013. [Also,] on February 1, 2013, he pleaded guilty in the Ontario Court of Justice to 15 of the 32 charges for fraud brought against him. He admitted that he had defrauded 18 individuals and one company of at least $6 million. He was subsequently sentenced to six years in prison and ordered to provide restitution to the individuals he defrauded.”

Under these circumstances—and according to MFDA Rule 8.4(1)(b), which allows hearing panels to act when no proper reply is received from respondents—the panel accepted the facts alleged along with the conclusions drawn by the staff of the MFDA in the notice of hearing.

The MFDA document adds Francis Roy, counsel of the MFDA, then filed “written submissions on the allegations, the appropriate penalties, and the costs he was seeking…He relied on the affidavits of [Ian R. Smith, a senior investigator for the MFDA] and the victim.

“Notwithstanding that [Yoannou] probably defrauded 32 individuals of over $10 million, Roy focused on the admissions of the Respondent in Criminal Court to the effect that he defrauded 18 individuals and one company of at least $6 million.”

The MFDA says Roy described Yoannou’s “fraud [as] the largest in MFDA history and his conduct as outrageous. [Yoannou] preyed on those who had trusted him and blatantly bilked each of them of substantial sums.”

It adds Roy “argued [Yoannou] should be prohibited for life from conducting securities related business in any capacity. He also asked for a fine of $6 million for theft, and an additional fine of $50,000 for failing to co-operate with the MFDA investigation. Finally, costs should be imposed to indemnify the MFDA for the costs incurred for preparing the case and acting at the hearing.”

The MFDA document shows the hearing panel ruled Roy had proven his case on a balance of probabilities. Accordingly, it signed the order dated April 25, 2013.

It shows, the MFDA said, “The respondent is a despicable fraudster. He stole at least $6 million from 18 clients and other individuals, and used the cover of his employment by Investors Group to advance his fraudulent schemes. [He] has ruined his life. He will have six years in the penitentiary to reflect upon his crimes. The hearing panel is, however, more concerned with protecting the public, deterring others, and maintaining the integrity of the public securities markets and the MFDA’s enforcement processes.”

What’s more, the MFDA added, “[He] stole from his clients and ignored the regulator. He did not appear at the hearing and has shown no remorse for his actions. He deserves the maximum penalty this [panel] can impose.”

In conclusion, the MFDA hearing panel imposed the following:

(a) a permanent prohibition from conducting securities related business in any capacity while in the employ of, or associated with, any MFDA Member, pursuant to s. 24.1.1(e) of MFDA By-law No. 1;

(b) a fine of $6,000,000 in respect of Contravention #1, pursuant to s. 24.1.1(b) of MFDA By-law No. 1;

(c) a fine of $50,000 in respect of Contravention #2, pursuant to s. 24.1.1(b) of MFDA By-law No. 1; and

(d) costs of $7,500 pursuant to s. 24.2 of MFDA By-law No. 1.