Tribunal sets aside regulator’s decision and reduces disgorgement order

The Canadian Investment Regulatory Organization (CIRO) is being given the opportunity to decide whether an allegation of misappropriation will be re-heard in a new hearing before a different CIRO panel, after the Ontario Securities Commission’s Capital Markets Tribunal set aside a CIRO finding that Mark Odorico misappropriated client funds.

CIRO notes that $579,000 was not returned to clients who advanced funds to Odorico, either for investment purposes or as a personal loan. (Testimony from Odorico and his former clients conflicted during the original hearing.)

In the tribunal’s reasons and decision, the former registered representative with CIBC World Markets had his penalty – to disgorge $579,000 – reduced by $150,000 to $429,000 to reflect the fact that two out of the three clients who accused Odorico of misappropriation provided evidence that the monies advanced were in fact a loan.

The tribunal also examined whether or not Odorico was treated fairly based on his health condition (it was determined that he was), whether CIRO’s predecessor organization, the Investment Industry Regulatory Organization of Canada (IIROC) erred by dismissing adjournment request following numerous earlier delays (they did not), or if the panel erred by proceeding with only two members. (This was also later found to not have merit.) 

With respect to the panel’s findings that Odorico misappropriated client funds from JR and MR, however, they say the panel overlooked and misapprehended material evidence. “The panel preferred JR’s and MR’s testimony that the money was not advanced as a personal loan to Odorico but was, instead, advanced for a guaranteed investment,” the decision states. The overlooked material evidence included a promissory note, a complaint letter indicating that other clients were also known to have loaned Odorico money, a bank draft and a postdated check. 

“From our review of the CIRO record, loan language in the complaint letter was not specifically drawn to the attention of the CIRO panel and neither JR nor MR was asked to explain it. Nevertheless, we conclude that it was material enough that it ought to have factored into the CIRO panel’s considerations.” 

The CIRO panel’s considerations were further called into question because each piece of evidence wasn’t discussed in its own decision. 

Aside from the disgorgement amendment, the tribunal says CIRO’s remaining penalties, a fine of $125,000, disgorgement of the remaining $429,000, a permanent ban from registration and costs in the amount of $25,000 were not harsh or excessive given the circumstances.