Tribunal orders $500,000 fine and $85,000 in costs for undisclosed conflict of interest

Although investigators and a panel convened for the Ontario Capital Markets Tribunal found that a former mutual fund advisor caused no financial harm to his late client and that he may never receive anything from her estate, being named a beneficiary and not reporting this conflict of interest and others, has led to his permanent ban from registration, along with significant sanctions and costs.

In its reasons and decision, the Capital Markets Tribunal found that Aurelio Marrone acted unfairly, dishonestly and in bad faith towards his client, MU when he accepted an appointment as her attorney for property and an appointment as her alternate executor. The tribunal further concluded that these were serious breaches of both Mutual Fund Dealers Association of Canada (MFDA) rules and of the policies and procedures of IPC Investment Corporate – Marrone’s employer at the time.

Although Ontario Securities Commission (OSC) staff requested a fine of $500,000, costs in the amount of $100,000 (the OSC staff’s costs were $235,000 in reality), plus disgorgement of nearly $1.9-million, the value of MU’s estate, and a reprimand, the Tribunal stopped short of ordering the disgorgement, instead fining Marrone $500,000, ordering costs in the amount of $85,000 and permanently banning him from participating in Ontario capital markets.

The tribunal says it has not previously decided a case with similar facts.

It rejected Marrone’s assertion that the breaches were technical. It also declined to see Marrone’s relationship with MU as a mitigating factor. 

“We do not agree with Marrone’s submission that his pre-existing personal relationship with MU somehow lessens the seriousness of the misconduct. Indeed, as found by the merits panel, Marrone’s close friendship with MU actually increased MU’s vulnerability and was an aggravating factor,” the reasons for decision states.

Marrone also argued that he never acted on either appointment, did not cause any financial harm to MU and emphasised that given MU’s will and estate are subject to ongoing litigation that he may never receive any benefit.

The tribunal, on the other hand, says the seriousness of the misconduct was heightened by the fact that Marrone managed all of MU’s assets, which made up one-third of his book of business. It was also heightened by his involvement with the preparation and execution of MU’s estate documentation and by the fact that lawyers wanted a capacity assessment which was never obtained.

“A doctor, who was not identified as a capacity assessment officer, provided Marrone with a certificate stating that MU was capable of giving instructions about her health, which Marrone hand-delivered,” the reasons for decision document states. Marrone was also aware that on the lawyer’s first visit to have MU sign documents, she was not prepared to sign, and asked why she would leave her estate to Marrone when she had family.

“We reject Marrone’s submission that because he did not cause financial harm to MU, significant sanctions are not appropriate,” they add.