Court upholds tribunal’s fraud ruling and penalty

By James Langton | October 27, 2023 | Last updated on October 27, 2023
2 min read
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An Ontario court denied an appeal of decisions by the Capital Markets Tribunal that found executives at fund manager Solar Income Fund Inc. committed fraud by using cash from one investment fund to pay distributions to investors in its other fund.

The Superior Court of Justice largely denied an appeal from Kenneth Kadonoff, who was sanctioned by the tribunal back in January for his role in the misconduct.

Along with the firm’s two other principals, Kadonoff (who served as interim president and in-house legal counsel at Solar) was banned from trading and from serving as a director or officer of public companies.

He was also ordered to pay a penalty of $125,000, along with $37,500 in costs, and found to be jointly liable for $51,361 of the $234,864 in disgorgement ordered against the firm.

According to the court’s decision, Kadonoff appealed the penalty and the finding that he engaged in fraudulent conduct, arguing that the tribunal erred in both its rulings.

The OSC maintained that the appeal didn’t reveal any errors in the panel’s rulings, but instead amounted to a request for a re-hearing of the evidence.

The regulator did acknowledge that the disgorgement order against Kadonoff should be reduced to $45,298 from the $51,361 ordered by the panel.

On the rest of the appeal, however, the court sided with the OSC, ruling that the panel didn’t make any reversible error in its decisions.

While it accepted the correction to the disgorgement order, the court found that this “does not affect the panel’s ultimate finding that Mr. Kadonoff breached the [Securities] Act.”

It also rejected his other proposed grounds of appeal, finding that Kadonoff “has not identified any legal error, nor is there any palpable and overriding error in the panel’s findings of fact.”

Finally, the court also dismissed the appeal on sanctions, saying the panel “carefully went through the appropriate principles and reviewed in detail the arguments and factors pertinent to sanction.”

Noting that the reduction to the disgorgement order was “relatively minor,” the court declined to reduce the penalty or costs order against Kadonoff.

Given that the appeal was largely dismissed, the court ordered that Kadonoff pay the costs of the appeal ($15,000) to the OSC.

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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.