Court rules in favour of labour-sponsored venture fund against fund manager

A Mutual Fund Dealers Association of Canada (MFDA) hearing panel has banned Arash Gabriel Armani, a former rep with Investors Group Financial Services Inc., permanently and fined him $75,000 for failing to co-operate with an investigation into his conduct.

According to the MFDA hearing panel’s reasons, Armani did not participate in the hearing and was not represented by counsel: “The charge of failing to co-operate was clearly proven by the MFDA. There were many attempts to serve the respondent … but [he] has not communicated with staff in any way since the commencement of this proceeding.”

At the same time, the MFDA hearing panel ruled that there is “no doubt” that he was aware that an investigation was underway by the MFDA. “A permanent prohibition is clearly required in this case,” the panel said, which also imposed a financial penalty that was at the high end of the fine MFDA staff had recommended.

The MFDA’s attempted investigation involved four separate matters including unapproved outside business activities, unauthorized mortgage transactions and borrowing from clients.

“It is our view that the underlying conduct in this case was potentially very serious. It involves a number of persons and in some of the incidents the sum that was involved was apparently not repaid. If the respondent had co-operated, we would know more about the nature of the conduct. It is possible that we would have been able to conclude that the funds were misappropriated. As it is, we are only able to suspect this,” the hearing panel said.

“Failure to co-operate in an investigation is always serious, particularly in a case such as this where the underlying conduct is potentially very serious,” it concluded. “The conduct in the present case is not at the lower range of seriousness, and so we impose a fine of $75,000, the highest amount suggested by counsel for MFDA.”

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