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OSC seeks permanent ban for mutual fund salesman

The Ontario Securities Commission.


The Ontario Securities Commission wants to permanently ban a former mutual fund salesman at Investors Group Financial Services Inc. from working as a registrant in the financial sector after he was sentenced to six years in prison for fraud.

The regulator said it is seeking to ban Paul Yoannou from the industry on the basis of his guilty plea in 2013 on accusations he took more than $6.6-million from investors and put the money into his own bank account. He was convicted last year on 15 counts of fraud and ordered to serve six years in prison.

The OSC said it is seeking to have Mr. Yoannou permanently banned from working in the financial industry, from serving as an officer or director of a public company, or from trading securities in Ontario.

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"Yoannou solicited investors, who were his clients, to invest in various fraudulent schemes," the OSC said in a statement of allegations released Tuesday. "In exchange for their investments in those schemes, Yoannou provided investors with false promissory notes using Investors Group letterhead. Yoannou did not use investor funds as promised, but instead deposited the monies in bank accounts under his control and for his own benefit."

The commission has the ability to impose orders on a reciprocal basis by relying on convictions in other legal forums, which allows penalties to be imposed without holding a new hearing to consider the same evidence in the case.

At his trial last year, Mr. Yoannou admitted he told clients their money was being invested in Investors Group financial products, but instead took it for himself and sent them falsified account statements.

The Crown attorney told the court that Mr. Yoannou had a gambling problem and lost most of the money on online gambling sites, so there was nothing to recover when the fraud came to light.

Mr. Yoannou was also ordered to repay $6.6-million owed to investors, but his lawyer told the court last year that he has no money so the chances of paying restitution are "remote."

The Mutual Fund Dealers Association of Canada, which regulates people working in the mutual fund sector, also permanently banned Mr. Yoannou from being an MFDA registrant and ordered him to pay a $6-million fine, which is the largest penalty ever imposed by the MFDA.

Bans imposed by the OSC would be broader than the MFDA penalties, however, and would encompass more than just a prohibition from being an MFDA member.

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The MFDA accused Mr. Yoannou of stealing almost $12-million from clients. The criminal case, by comparison, involved accusations of stealing $6.6-million because it involved a subset of 32 of his victims.

The MFDA said Mr. Yoannou pitched clients on investment schemes he created himself, but told them they were Investors Group products. The included a credit card financing program, a construction loan program, a diamond trading program and an opportunity to invest in a private company whose business was in preventing credit card fraud.

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About the Author
Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More


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