Ontario Securities Commission Launches Investigation Into Bridging Finance

The Ontario Securities Commission (OSC) has launched an investigation into Bridging Finance, one of Canada’s largest private lenders.

The OSC is investigating allegations that Bridging Finance misappropriated investor funds. An Ontario court has appointed accounting firm PricewaterhouseCoopers to take control of Bridging Finance at the request of the Ontario Securities Commission, pending the outcome of the investigation.

Bridging Finance, based in Toronto, was run by a husband-and-wife team David and Natasha Sharpe. The firm, which had about $2 billion in assets under management as of last December, lends to small and medium-sized companies involved in everything from milling flour to delivering groceries.

In court documents, the OSC alleges the firm and senior executives mismanaged funds and failed to disclose conflicts of interest.

Among the alleged conflicts, Chief Executive Officer David Sharpe received $19.5 million in undisclosed payments into his personal chequing account from a company controlled by entrepreneur Sean McCoshen. During that same period, Bridging Finance’s funds were lending more than $100 million to McCoshen’s other companies, according to court documents.

The OSC also alleges that David Sharpe moved at least $1.4 million to offshore accounts. The securities commission also says it has uncovered evidence that Bridging and certain members of its senior management -- including David and Natasha Sharpe -- breached securities laws and regulations and misled investigators about various transactions.

One of the most serious accusations is that Bridging Finance misappropriated about $35 million "to complete an acquisition for its own benefit," a deal with investment manager Ninepoint Partners LP for an interest in an income fund that the two firms had been jointly operating.

"Investors deserve a full investigation into the business activities of Bridging Finance and the Sharpes and to know that their investment funds are in the hands of honest, competent and responsible custodians," the OSC wrote in its regulatory filing.