An Ontario-based financial advisor who admitted to falsifying the signatures of three vulnerable clients and taking almost $200,000 from them has been permanently banned from securities-related business and fined $150,000.

In its reasons for its decision, a hearing panel of the Mutual Fund Dealers Association acknowledged that while Robert Eugene Palumbo repaid the money, admitted to a gambling problem and expressed remorse, misappropriating client funds is a serious contravention of MFDA rules.

“Trust is the foundation of a healthy relationship between clients and Approved Persons. Misappropriation is an irreparable breach of trust,” said the panel in its decision.

Borrowed money from a related client

The panel also determined that Palumbo borrowed about $10,000 from a client who is also his cousin. Again, he repaid the loan and there was no financial harm to the client, but the panel said Palumbo was obligated to refrain from personal financial dealings with the individual because the person was a client. 

“Such personal financial dealings give rise to a conflict of interest... Personal financial dealings and the real or perceived conflict of interest that results causes harm to the securities industry.”

A third allegation against Palumbo was that he obtained, possessed, and in six instances used to process transactions 13 pre-signed account forms in respect of 10 clients.

The hearing panel said the use of pre-signed forms adversely affects the integrity and reliability of account documents, destroys the audit trail and prevents the MFDA member from effectively supervising its representatives and protecting clients.

Panel rules misconduct ‘serious’

It was also determined he failed to co-operate with an MFDA investigation.

In making its decision, the panel acknowledged the clients were repaid by Palumbo’s family, had not previously been the subject of MFDA disciplinary hearings and had some recent family issues.

But it said Palumbo’s misconduct was “so serious that it is necessary to protect the public from a recurrence by removing the Respondent from the securities markets.”

In addition to being banned from the securities business, he was also ordered to pay a fine of $120,000 and costs of another $7,500.