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Fund salesman accused of misappropriating $12-millionFrances Twitty/Getty Images/iStockphoto

A mutual funds salesman working for Investors Group Financial Services Inc. is accused of misappropriating almost $12-million from at least 55 investors whose money allegedly went straight into his own bank accounts.

The Mutual Fund Dealers Association of Canada, which regulates people working in the mutual fund industry, announced a disciplinary hearing Thursday against Paul Yoannou, who allegedly misappropriated $7.2-million from 40 clients and a further $4.4-million from 15 other investors who were not Investors Group clients between 2006 and 2011.

The MFDA said Mr. Yoannou told the victims they were investing in four different investment programs he claimed were approved by Investors Group, including a credit card financing program, a program to purchase diamonds in New York City and a loan program for condo developers.

A fourth scheme involved a legitimate company that was unaware Mr. Yoannou was allegedly seeking investors on its behalf. The regulator did not identify the company, but said there is no evidence it participated in the misconduct or was trying to sell its shares to the public.

The MFDA said the programs "were not known to or approved by" Investors Group.

"There is no evidence that the investment programs were legitimate investment opportunities," the regulator said.

The MFDA alleged Mr. Yoannou did not use any of the money to purchase investments and instead deposited all the funds in his own bank accounts.

Mr. Yoannou was fired by Investors Group last year after clients began raising concerns, the MFDA said, and he is not working as a registrant in the securities industry. The regulator said he has filed an intention to make a bankruptcy proposal and has not repaid any of the missing funds.

The MFDA has also accused Mr. Yoannou of failing to co-operate with its investigation, including refusing to provide documents or be interviewed.

Mr. Yoannou could not be reached Thursday for comment.

The MFDA has the power to levy fines of up to $5-million per offence and impose penalties equal to three times the profit gained from improper activity. The regulator can also bar him from working in the securities industry.

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