Ontario

CANADA'S top capital markets regulator is investigating officers and shareholders of Bridging Finance (BFI),one of the country's largest providers of private credit to small companies, on allegations that investor funds were misappropriated.

An Ontario court appointed PricewaterhouseCoopers to manage the affairs of BFI at the request of the Ontario Securities Commission (OSC), pending the outcome of the investigation. The move was made public on May 1.

BFI, based in Toronto, was run by a husband-and-wife team, David Sharpe and Natasha Sharpe. In court documents, the OSC alleges that under their direction, the firm misappropriated about C$35 million (S$37.9 million) ''to complete an acquisition for its own benefit'' - a deal with Ninepoint Partners LP for an interest in an income fund.

The regulator also alleged that officials at BFI mismanaged the funds by failing to disclose conflicts of interest, breached ''numerous securities laws and regulators'' - including by misleading investigators - and failed to act in the best interest of stakeholders.

Among the alleged conflicts, the OSC alleges that David Sharpe received C$19.5 million in undisclosed payments into his personal checking account from a company controlled by Sean McCoshen, during the same period that BFI's funds were lending more than C$100 million to Mr McCoshen's other companies.

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''The gravity of these regulatory breaches raises serious concerns about the ability of senior management to operate in Ontario's capital markets in compliance with securities law,'' the OSC said in court documents. BFI's investors ''can no longer rely on BFI or its senior management to protect their best interests''.

''Investors deserve a full investigation into the business activities of BFI and the Sharpes and to know that their investment funds are in the hands of honest, competent and responsible custodians,'' the regulator said.

The OSC also issued a temporary order halting trading of BFI funds and suspended David Sharpe's registration as ''ultimate designated person'' of the company.

David Sharpe did not respond to a request for comment on May 1.

BFI, which has about C$1.8 billion in assets under management, lends to small and mid-sized companies involved in everything from milling flour to delivering groceries. BLOOMBERG