These penalties follow the loss of about C$159 million entrusted to Norshield by 1,900 retail investors up to its collapse in 2005.

The authorities held that the pair "engaged in a course of conduct that was abusive to and compromised the integrity of Ontario's capital markets" and "knowingly made statements and provided evidence and information to staff that materially misleading and failed to state facts that were required to be stated in an effort to hide violations of Ontario securities laws."

Investors in Norshield and affiliated company Olympus United Group were "misled into believing that their funds were invested in a structure that had value and liquidity, of which it had neither."

Xanthoudakis and Smith "participated in transactions that artificially inflated" the asset values reported to investors and lack of evidence that they benefited from their improper conduct "does not mitigate the seriousness of the breaches, nor the consequences to investors of their conduct."

Xanthoudakis and Smith were both penalised C$1 million for failing to deal "fairly, honestly and in good faith" with investors and were also fined C$1 million each for failing to keep complete books and records and $125,000 for misleading OSC staff.

In addition to the fines, Smith and Xanthoudakis have been barred permanently from trading securities and barred from becoming or acting as a director or officer of any publicly traded company.