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

An Ontario court has denied a former advisor’s bid to obtain a discharge from bankruptcy.

The Court of Appeal for Ontario has rejected an application from a former advisor, Henry Cole, who was petitioned into bankruptcy by his former firm, RBC Dominion Securities Inc., in 2011, “after he misappropriated $5 million from clients while working as their investment advisor,” the court says.

According to the appeal court’s decision, when Cole applied for a discharge from bankruptcy in 2016, several conditions were imposed on his discharge, including that he pay $284,346 to the bankruptcy trustee, representing $5,000 per month in surplus income between 2011 and October 2015; that he pay an additional $5,000 per month for another six years ($360,000 in total); and, that the discharge from bankruptcy be suspended for two years.

An initial appeal of that order by Cole was dismissed by the Ontario Superior Court of Justice in 2016, and this latest appeal has now been denied.

The appeal court reports that Cole argued, among other things, that the proposed treatment of his surplus income is incorrect. However, the court disagreed, upholding the registrar’s ruling, and the lower court decision dismissing his appeal.

“The registrar’s order was discretionary in nature and there was ample evidence to support her decision. Among other factors, the appellant has a substantial income and the ability to pay. Moreover, the appellant chose not to testify to provide any evidence to the contrary,” the court noted.

Back in 2012, Cole settled with the Investment Industry Regulatory Organization of Canada (IIROC), agreeing to a $5 million fine and a permanent ban from the industry, after admitting to misappropriating money from clients. He also pled guilty to fraud and served two and a half years in jail.

Read: Toronto broker fined $5 million

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