Emerge Canada, senior executives improperly borrowed millions from ETFs, securities watchdog rules

Résumé détaillé

Most of the money has not been repaid and investors remain unsecured creditors

Ontario’s securities watchdog has ruled that Toronto-based fund manager Emerge Canada Inc. and two executives, including founder Lisa Langley, had breached their responsibilities to investors when they improperly borrowed almost $6-million of investor money to cover operating expenses.

On Tuesday, Ontario’s Capital Markets Tribunal – an independent division of the Ontario Securities Commission that handles adjudicative matters – found that Emerge Canada, Ms. Langley and chief financial officer Desmond Alvares violated a number of securities regulations, including failing to act in the best interest of the funds, borrowing investor money and insufficient record keeping.

However, the tribunal decision found that three members of Emerge’s independent review committee (IRC) – Marie Rounding, Monique Hutchins and Bruce Friesen – did not fail in their duties to oversee conflicts of interest, saying they were not informed about what was happening with the loans. All fund companies are required to have IRCs, which are responsible for reviewing a fund manager’s potential conflicts of interest on behalf of unitholders.

The OSC had accused Ms. Langley and Emerge of improperly borrowing millions from a group of exchange-traded funds named Emerge ARK, investments that were launched with U.S.-based ARK Investment Management LLC, which is run by prominent U.S. investor Cathie Wood.

Emerge CEO tells hearing she intends to repay $4.7-million owed to investors

Most of the money has not been repaid and investors remain unsecured creditors.

“We find that Langley was not familiar with the regulations and the compliance policies and procedures of her own firm,” the tribunal said in its findings.

“She had a complete misapprehension about what was a conflict, the nature of conflicts in fund management and the process for managing conflicts, including the purpose of an independent review committee.”

The tribunal said Ms. Langley failed to meet her obligations as an ultimate designated person and…

Début de l'article, extrait de The Globe and Mail (Report on Business). Pour lire la suite, ouvrez l'article chez le média.