The Mutual Fund Dealers Association of Canada (MFDA) has fined Jacques Scribnock, of Kinburn, Ont. $1.5 million for misappropriating client funds and failing to cooperate with the regulator’s investigation.

According to MFDA documents, Scribnock, while a mutual fund salesman with Investia Financial Services Inc., headquartered in Quebec City, incorporated a separate company, called Stone Securities, in 2009 without the knowledge of his dealer firm.

Scribnock then lead four clients to believe this company was related to Stone & Co. Ltd., a mutual fund company which some of the individuals had already invested in. However, no such relationship existed. Scribnock also told clients that Stone Securites was an investment product offered by Investia and was affiliated with Manulife Financial.

In total, four clients invested $859,723 in Stone Securities between March 2009 and March 2011. According to the MFDA, Scribnock did not invest any of the funds but rather deposited them into a personal bank account. Scribnock has not returned or in any way accounted for the funds, says the MFDA. Three of the clients were retired and at the time one individual was about 80 years old and showing early signs of dementia.

In March 2011, Investia terminated Scribnock’s employment primarily for recommending unsuitable leveraged investments to clients, according the self-regulatory organization. At that time, the firm was not aware of Stone Securities. During an interview with the MFDA following the termination, Scribnock denied entering into any outside business activity that was not disclosed to Investia. It was during the course of this investigation that the MFDA became aware of allegations that Scribnock had misappropriated funds.

Scribnock continued to solicit funds from clients after he had left Investia, however, the MFDA did not include these funds in its investigation because it does not have jurisdiction over those transactions. The Ottawa Police Service also investigated Scribnock and have charged him under the Criminal Code, according to the MFDA. The charges are still pending. The police place the total of funds deposited with Stone Securities at $2.6 million.

In addition to the fine, Scribnock is permanently banned from conducting securities-related business in any capacity with an MFDA member and must pay costs of $7,500.