Ban, fine of $300K follow repeat episode of unapproved OBA

A former fund representative who was previously disciplined for engaging in unapproved outside business activity has now been fined and banned from the industry for doing it again — this time costing investors dearly.

A hearing panel of the Canadian Investment Regulatory Organization (CIRO) ordered that Leszek Dziadecki, a former rep with Global Maxfin Investments Inc. in Mississauga, Ont., is permanently banned, fined $300,000 and ordered to pay $30,000 in costs after it found he violated industry rules against unapproved outside business activity for a second time.

Specifically, the panel found that, between 2015 and 2016, Dziadecki sold syndicated mortgage investments (SMIs) — the BioNorth SMI — to clients and others, who ultimately lost almost $1.4 million on their investments.

“As testified by several investors, the losses were devastating, psychologically and financially,” the panel said in its ruling on sanctions.

“In addition to lost savings, several of the investors mortgaged their homes to invest in the BioNorth SMI. As a consequence, these investors are now left with substantial debts that they are required to repay from their income or must otherwise sell their homes,” it said.

The investments were sold in violation of his firm’s policies, the panel said, noting that Global Maxfin never sold syndicated mortgages and didn’t authorize its reps to sell them either.

“The seriousness of the misconduct is further aggravated by the fact that the respondent preyed on the investors to have them invest in the BioNorth SMI,” the panel added. It noted that some of the investors testified they trusted Dziadecki both as a mutual fund advisor and as a member of the same cultural and linguistic community.

“The respondent capitalized on this trust by going beyond merely offering the BioNorth SMI to the investors, to actively persuading them, giving the investors repeated assurances in response to any expression of concern about the safety of the investment,” it said.

The panel also noted that Dziadecki was previously disciplined by the Ontario Securities Commission (OSC) for engaging in unapproved outside business activity back in 2006 — a case that was settled with him agreeing to disgorge the commissions he’d generated from the activity ($28,200), along with costs of $5,000, a reprimand and two years of close supervision by his dealer.

In that case, investors didn’t suffer any losses, the panel indicated.

“The OSC proceeding had no deterrent effect on the respondent,” the panel said, adding that the prior discipline by the OSC is a significant aggravating factor in the sanctions handed down in this case.

“That the respondent chose to proceed with the recommendation and sale of the BioNorth SMI, notwithstanding his prior discipline and knowledge that [his dealer] did not permit him to sell SMIs, CIRO advised the panel that they are unaware of any precedent where [a rep] has twice engaged in such serious misconduct,” it said.