The Ombudsman for Banking Services and Investments (OBSI) announced another instance of a fund dealer refusing one of its compensation recommendations involving an advisor who misappropriated client funds through a fictitious investment scheme.

Saskatoon-based Sentinel Financial Management Corp. is refusing to compensate a client for the money she lost on a phony off-book investment that was recommended by an advisor, Adele Kamisky, who has since been sentenced to jail for misappropriating client funds. On April 30, OBSI announced that Sentinel had refused to compensate two other clients who were caught in the same scheme.

The dispute resolution service recommended that the firm pay the client $55,000 in compensation after its investigation revealed that the client, a retiree with modest savings, allegedly had her funds misappropriated by her advisor when she was sold a purported off-book investment. OBSI says none of the client’s funds were actually invested; instead, they were deposited in the advisor’s personal account. The funds have not been recovered by the investor, according to OBSI.

OBSI (which identifies Kaminsky only as “Mrs. K”) says the advisor was terminated by the firm in 2013 after an anonymous tip to the Financial and Consumer Affairs Authority of Saskatchewan (FCAA) revealed that she had sold a purported investment called “Enviro-Can Private Placement” to some of her clients. The FCAA has since brought allegations against Kaminsky, alleging that she sold Enviro-Can off-book, and that she misappropriated investors’ money. Those allegations have not been proven. A hearing was concluded earlier this year by the FCAA, and a decision is pending.

The RCMP launched a criminal investigation against Kaminsky, OBSI notes and it reports that neither the FCAA, nor the RCMP has been able to conclude that Enviro-Can was an actual investment. Earlier this year, Kaminsky pled guilty to one count of fraud over $5,000 in Saskatchewan provincial court. She was subsequently sentenced to four years in a federal penitentiary and ordered to reimburse investors.

According to the court decision, 10 people, ranging in age from 52 to 86, were defrauded of a total $639,700 by Kaminsky in two separate schemes: Envirocan and Forex, an unregistered foreign-exchange trading scheme. The court decision notes that during the course of Kaminsky’s fraudulent activities, she spent $124,000 on the Shopping Channel and lost $665,000 at a casino in North Battleford, Sask.

According to OBSI’s report, Sentinel’s position is that the advisor’s actions were not carried out through the firm; Kaminsky violated the firm’s policies and procedures; and there is no evidence of lack of supervision by Sentinel. As a result, Sentinel declined to offer compensation. However, OBSI concluded, the investor “reasonably believed that Enviro-Can was an investment made through and approved by Sentinel.” As a result, it recommended that the firm compensate the client for her losses.