Former rep who claimed clients’ funds were loans penalized more than $700K

An IIROC hearing panel has banned a former rep and ordered him to pay more than $700,000 after it found he misappropriated client funds that he claimed were loans.

In a decision released Thursday, IIROC ordered Mark Odorico — a former Toronto area rep for CIBC World Markets Inc. — to pay a $125,000 fine, disgorgement of $579,000 and $25,000 in costs.

In addition to misappropriating client funds, IIROC alleged Odorico made unauthorized trades and failed to co-operate with the investigation. Odorico is no longer registered.

In 2013, Odorico bought a house using a vendor takeback mortgage (VTM), IIROC’s reasons for decision stated. The house seller then became his client.

The following year, the client testified, Odorico suggested she give him additional funds to invest on her behalf in his name. “He told her that he could make more money for her than she could in the CIBCWM investment accounts held with him,” the IIROC decision said.

Between 2014 and 2018, the client gave Odorico $449,000 to invest. Odorico testified the money was a loan from the client to repair defects to the house he had bought from her, but the client denied this.

Of the $449,000, she said only $9,000 was returned. Odorico stated that he had made interest payments in cash as high as $4,000 to $5,000 per month for four to five years.

IIROC said Odorico provided no evidence of repairs to the house or of the interest payments.

“The panel found that the respondent’s testimony strained credibility, that an experienced investment advisor who dealt with financial transactions daily would make cash payments on a loan without getting receipts in writing and without knowing the amount remaining unpaid,” the decision stated.

The panel concluded that taking client money to be invested and using it for other purposes constituted misappropriation, even though where the money ended up wasn’t disclosed.

It further found that Odorico executed 45 unauthorized trades in the client’s account.

IIROC also found Odorico had misappropriated $150,000 from a couple who had been his clients for some time.

In 2018, Odorico recommended they buy a security for $150,000 that he claimed could generate a 10% return within 30 days. The couple sent a $150,000 bank draft to Odorico, which Odorico required be payable to himself, the decision stated.

A month later, Odorico gave the couple a post-dated cheque for $165,000, but he asked them not to cash it because he didn’t have sufficient funds. He also asked them not to report the matter.

Odorico testified the $150,000 was a loan, which the clients denied, and they eventually complained when it wasn’t returned.

Odorico said he had promised to repay the couple as soon as he refinanced his property but he was prevented from doing so because of a legal matter. However, IIROC found that the lis pendens on the property wasn’t registered until almost a year after the funds should have been repaid.

The panel also found the money the couple sent to Odorico was for investments and not a loan.