According to documents filed in court, the OSC ‘uncovered evidence that BFI and certain members of its senior management team … appropriated amounts from the BFI Funds for personal gain’
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A Toronto-based investment management firm with $2 billion in assets under management has been put into court-approved receivership while the Ontario Securities Commission conducts an investigation into questionable related-party transactions and movement of funds to personal bank accounts.
In an unusual twist, David Sharpe, the chief executive and one of the main operators of Bridging Finance Inc., which raises capital from investors to make loans to corporate borrowers in exchange for limited partnership units, is himself a former mutual fund regulator.
According to documents filed in court, enforcement staff of the Ontario Securities Commission “has uncovered evidence that BFI and certain members of its senior management team … appropriated amounts from the BFI Funds for personal gain … mismanaged the BFI Funds, including by failing to disclose material conflicts of interest … (and) breached numerous securities laws and regulations, including by misleading Enforcement Staff.”
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As a result, Canada’s largest capital markets regulator asked an Ontario court judge Friday to appoint receiver PriceWaterhouseCoopers Inc. “to safeguard the best interests of stakeholders, the reputation of Ontario’s capital markets, and the integrity of the ongoing investigation.”
The OSC says husband and wife Natasha and David Sharpe, who was director of investigations at the Mutual Fund Dealers Association between 2005 and 2009, are “the two most senior officers and decision-makers at the firm.”
She founded Bridging Finance, serves as executive chairman and is a minority shareholder. She was previously CEO and chief investment officer, according to the OSC.
The regulator’s investigation has focused on a series of transaction between 2017 and 2020, and potential conflicts of interest arising from the relationship between the firm, certain directors, officers and shareholders and the principals of some of the loan counterparties.
Among other things, the OSC alleges that, under Sharpe’s direction, “BFI misappropriated approximately $35 million from the BFI Funds to complete an acquisition for its own benefit.”
In addition, the documents filed in court allege David Sharpe received approximately $19.5 million in undisclosed payments in his personal chequing account from a company that was controlled by a person whose other firms BFI had loaned more than $100 million.
The regulator termed the evidence uncovered so far as “significant and credible” in the document.
