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The Ontario Securities Commission is alleging that individuals behind Bridging Finance Inc., a Toronto-based investment management firm with $2 billion in assets under management, committed fraud, misappropriated funds, made misleading or untrue statements and misled investigators.
The formal allegations of wrongdoing, laid out Thursday in a 16-page statement of allegations, come nearly a year after the firm — which raised capital from investors to make loans to corporate borrowers in exchange for limited partnership units — was put into receivership in a process kicked off by the OSC, which was already investigating.
“David and Natasha Sharpe defrauded institutional and retail investors out of millions of dollars through their dishonesty and deceit,” the OSC said in the statement of allegations.
“The Sharpes exploited their positions of trust for their own personal gain. Staff of the Ontario Securities Commission will take decisive action to permanently remove such persons from Ontario’s capital markets.”
None of the allegations have been proven.
In an unusual twist in the case, one of the accused is a former regulator. David Sharpe, who was chief executive and one of the main operators of Bridging, was director of investigations at the Mutual Fund Dealers Association between 2005 and 2009.
He and his wife Natasha have denied the allegations against him, which include accusations of misappropriating $40 million from investors.
Bridging was founded by Natasha Sharpe, who was CEO of the firm at one time, according to the OSC.
“Through their relationships with three borrowers and with the assistance of Bridging’s Chief Compliance Officer, Andrew Mushore, the Sharpes funnelled investor funds to themselves and Bridging, then concealed their wrongdoing from investors,” the OSC alleges.
“The Sharpes then obstructed (OSC) Staff’s investigation to try to cover their tracks. Together with Mushore, they destroyed, concealed and altered Bridging records, misled Staff after swearing to tell the truth, and, in the case of David Sharpe, intimidated witnesses.”
Last May, the OSC’s investigation became public when it sought a court order to have a receiver take over Bridging’s operations to “safeguard the best interests of stakeholders, the reputation of Ontario’s capital markets, and the integrity of the ongoing investigation.”
Among other things, Canada’s largest capital markets regulator told the court it had found questionable related-party transactions at Bridging and movement of funds to personal bank accounts. Later, in June, receiver PriceWaterhouseCoopers Inc. said it had discovered that “a significant number” of emails had been intentionally deleted.
OSC alleges Toronto-based Bridging Finance ‘mismanaged’ funds, breached ‘numerous’ laws
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Bridging Finance’s court-appointed receiver says ‘significant number’ of emails intentionally deleted
Before the OSC laid out its formal allegations on Thursday, David Sharpe sought to have the investigation quashed on the grounds that the regulator had publicly disclosed testimony it had compelled from him, contrary to its own rules.
While the case moved ahead, a hearing panel for the OSC released reasons for its decisions Thursday, in which it found that OSC staff did not act in accordance with its own rules for publicly disclosing Sharpe’s compelled testimony. However, the panel concluded that altering the investigation was not an appropriate remedy.
“The OSC failed to protect Mr. Sharpe’s privacy rights contrary to its (own) statute,” Sharpe’s lawyer, Alistair Crawley, said in a statement, adding that the regulator “caused Mr. Sharpe and his family gratuitous stress and reputational damage.”
Crawley said Sharpe’s legal team “will seek a remedy for the OSC’s conduct.”