Ex-Bridging CEO refuses to participate in OSC hearing

One of the central figures in the rise and fall of Bridging Finance Inc. is refusing to participate in the enforcement proceedings brought against him by the Ontario Securities Commission (OSC) that began on Monday.

Ahead of a lengthy hearing into the allegations, former Bridging CEO David Sharpe’s attorneys notified the Capital Markets Tribunal that he would not take part in the enforcement proceedings, citing concerns about fairness and signalling that he intends to pursue his concerns with the regulator in court.

Sharpe already filed legal action against the OSC in the Ontario Superior Court of Justice last December. That action, his attorneys said in a letter to the tribunal, “raises serious issues regarding the constitutionality of the OSC’s power to compel and disclose this evidence.”

The OSC has yet to file a defence, the letter noted.

Sharpe has long objected to the disclosure of portions of testimony that was obtained in a compelled examination by the OSC and disclosed in court filings seeking the appointment of a receiver for Bridging.

In a decision on March 30, 2022, the tribunal found that the OSC should have obtained an order specifically authorizing the disclosure of the compelled testimony.

While that ruling admonished the regulator for failing to follow the required procedure at the time, the tribunal rejected Sharpe’s efforts to have the enforcement proceeding stayed on the basis of that mistake. The legislation has subsequently been changed to specifically allow the OSC to disclose compelled testimony in court filings without first obtaining authorization.

In his attorneys’ letter to the tribunal, Sharpe said he reserves the right to appeal the ruling rejecting his motion for a stay, and announced that he won’t be participating in the regulator’s proceeding against him.

“Because the Tribunal has failed to hold the OSC to account, and instead exacerbated the harm to Mr. Sharpe by permitting further publication of his compelled testimony, Mr. Sharpe has grave concerns about the fairness of the pending proceeding,” it said.

Given those concerns, and the fact that his arguments have repeatedly been rejected by the tribunal, “Mr. Sharpe will now be pursuing his remedies in court,” it added.

In the wake of that development, the hearing began with OSC senior litigation counsel Mark Bailey delivering an opening statement outlining the regulator’s case against Sharpe, his wife and Bridging’s former chief investment officer Natasha Sharpe, and Bridging’s former chief compliance officer Andrew Mushore.

Bailey said the regulator will set out to prove that investors in the Bridging funds were defrauded out of tens of millions of dollars in a series of conflicted transactions involving loans from the funds to various entities that then made payments to Sharpe, and that they sought to cover up the misconduct by altering documents, misleading investigators and trying to intimidate potential witnesses in the case.

Those allegations have not been proven. In the letter from his lawyers, Sharpe reiterated that while he “will not be participating in the hearing, he does not admit any of the allegations contained in the statement of allegations and expects that the OSC will be held to its burden of proof.”

He also reiterated his objections to the compelled testimony being admitted as evidence against him in the enforcement proceeding.

The OSC began its case with direct examination of the lead investigator on the Bridging file, Daniel Tourangeau, the OSC’s senior forensic accountant. His testimony will continue Tuesday in what is scheduled to be a 36-day hearing running over eight months into February 2024.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.