Toronto-based Investment Manager Bridging Finance Inc. collapsed on Friday evening. The OSC has frozen their funds and put PricewaterhouseCoppers in charge of the business.
They had about $2billion in assets in their funds, which were mostly in the private debt class. They specialised in short to mid-term loans to emerging businesses and those who couldn't get regular bank rates because of credit rating issues; the idea being to lend money to these businesses that had proven future receivables on the books, but still needed interim cash to fund day-to-day operating expenses for a few months until they got it, hence the name "bridging finance".
It turns out the whole thing may have been a sham run by the owners, who are husband and wife. It sounds like the investors money was just going all over the place, including tens of millions into their personal bank accounts. These funds were sold to retail investors through third party brokers and there were apparently whispers of bad things going on as early as a year ago, when both Scotia and RBC allegedly blacklisted the company and banned their advisors from selling or recommending their products. TD apparently did not follow, and continued to allow their financial advisors to sell the funds. Also coming out is a long list of, shall we say, interesting characters directly or indirectly involved in this business. One is the
famous Gary Ng, who apparently purchased part of his stake in this firm using money lent to him by the firms' own funds themselves without disclosure to the fund investors that's where their money went; an extraordinary breach of conflict of interest rules if true.
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 Fu…
financialpost.com
This is a really big black eye for the industry. $2B AUM doesn't put them anywhere near a top-10 or even top-50 list of investment managers, but it's a big amount to swallow as being run as a fraudulent business. At least the OSC managed to get in before the whole well had dried up. This is certain to roil the Canadian markets on Monday, though the firm invested only in the debt markets, not the equity markets.
I feel bad for the regular investors who put something of their retirement savings here, and may now both lose some money and have whatever is left frozen for months if not more than a year while the investigation is done. Also the regular worker bees at this company (receptionists, operations and trade processing, IT staff, etc.) who probably had zero idea what was going on up in the executive offices and have now all lost their jobs with absolutely zero warning.
www.globenewswire.com
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