A former adviser for Investors Group in Canada was sentenced to six years in jail and then fined $6 million by the self-regulatory body Mutual Fund Dealers Association (MFDA).
Paul Yoannou pleaded guilty to 15 counts of fraud in February after he was alleged to have misappropriated more than $11m from 40 clients and 15 other individuals. Yoannou was also fined an additional $50,000 for failure to cooperate with regulators, ordered to pay costs of $7,500 and permanently prohibited from participating in the registered securities business.
Yoannou’s lawyer said a gambling problem was behind the adviser’s “fall from grace” over a six-year period. He said the situation snowballed when Yoannou took money from clients and then used money from other investors to replace it.
Many of Yoannou's clients were his friends, including Bill Dolan, who lost nearly $1m according to The Star. Yoannou was ordered to pay $1m to Dolan, who said "I'll never see that". The paper said Yoannou filed for bankruptcy in January 2012 citing $17.6m owing to creditors.
In a case here earlier this year, ASIC handed out a record fine for David Hobbs, who was responsible for a $30m Ponzi scheme. Hobbs was fined $500,000 and was permanently banned from managing companies and providing financial services.
He was believed to be behind the scheme that operated unlicensed funds, targeting Australian investors and self-managed superannuation funds. More than $55m was invested in 14 individual investment funds in countries including New Zealand, the United States, Hong Kong, Vanuatu, the Bahamas, Anguilla, and the Turks and Caicos Islands.
FPA CEO Mark Rantall says that while he calls for the harshest penalties against those who defraud individuals of their life savings, the regulator has to think about the ‘collectability’ of fines.
“Taking away someone’s livelihood and lifetime banning is certainly a significant step, jail time if the crime is significant is also an appropriate step. In terms of fining, my experience has been that you can implement any sort of fine you like, it’s whether you can collect the money and enforce it.
“I think ASIC have now got wide-ranging powers to deal out signifcant penalties and also to stop people getting licensed when there are concerns from the regulator. Those powers have recently, throughout future of financial advice reforms, been increased, so I’d think they were adequate at the moment. It’s a matter of how the regulator uses those powers that’s always the question.”
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