Tribunal sanctions trio in “moderately serious” fraud

By James Langton | January 12, 2023 | Last updated on January 12, 2023
2 min read

Ontario’s Capital Markets Tribunal has ordered market bans and monetary sanctions against three men who defrauded investors by diverting money from one fund to pay investor distributions and fees for another fund.

In March 2022, the tribunal found that the principals of Solar Income Fund SIF Inc. (SIF Inc.) engaged in fraud when they took $234,864 from the SIF Solar Energy Income & Growth Fund to pay distributions to investors in a second fund — Solar Income and Growth Fund #2 — and to pay fees to the second fund’s exempt market dealers.

Now, the tribunal has ordered sanctions in the case.

The three SIF principals — Allan Grossman, Charles Mazzacato and Kenneth Kadonoff — were all banned from trading and from serving as directors or officers of public companies.

SIF and Grossman were both ordered to pay $175,000 penalties, Kadanoff was sanctioned $125,000 and Mazzacato was penalized $1,000.

According to the tribunal’s decision, the small penalty levied against Mazzacato reflects his inability to pay a large penalty, given that he is essentially living paycheque to paycheque, and uses all of his income to pay basic living expenses.

“In our view, these circumstances, the detail that Mazzacato provides, and the fact that none of Mazzacato’s evidence was challenged, combine to support a conclusion that Mazzacato’s is an exceptional case that justifies making his inability to pay financial sanctions a significant factor for our consideration,” it said.

Absent the inability to pay, the panel would have ordered a $100,000 penalty against Mazzacato, it said, adding the $1,000 penalty “reflects our denunciation of his misconduct but avoids having a punitive effect.”

It also declined to order disgorgment or costs against him, based on his “exceptional circumstances.”

Against the others, the tribunal ordered that SIF and Grossman be jointly and severally liable to disgorge $234,864 to the Ontario Securities Commission (OSC), and that Kadonoff have joint liability for $51,361 of the disgorgement.

Additionally, SIF, Grossman and Kadonoff were each ordered to pay $37,500 in costs.

OSC staff sought heftier sanctions in the case. It asked the tribunal for $500,000 penalties against SIF Inc., Grossman and Mazzacato, and $400,000 against Kadonoff.

However, the tribunal found that, while fraud is inherently serious, the misconduct in this case was on the lower end of the scale.

“Their misconduct arose in the context of a legitimate business, it was not part of a larger scheme, and the respondents did not deliberately set out to commit a fraud,” the tribunal said in in its decision.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.