OSC seeks extended cease trade against hedge fund

The Ontario Securities Commission (OSC) is seeking to extend its cease-trade order against troubled hedge fund manager Traynor Ridge Capital Inc.

Ontario’s Capital Markets Tribunal said it will hold a hearing, in writing, to consider an application from the OSC that seeks to extend a temporary cease-trade order issued on Oct. 30 on the firm and its hedge funds. The order came after it was revealed that there was no longer anyone in control of the firm.

The OSC reported that Christopher Callahan, Traynor’s sole officer, director and shareholder, and the firm’s chief compliance officer and ultimate designated person, had died.

With no one in control at Traynor, the OSC immediately issued a temporary cease-trade order, which expires on Tuesday, Nov. 14.

Now, the regulator is asking the tribunal to extend that order until Feb. 8, 2024.

On Nov. 3, the Ontario Superior Court of Justice appointed Ernst & Young LLP (EY) as the firm’s receiver at the OSC’s request.

In its application to the tribunal, the OSC said that EY supports extending the cease-trade order, which would help the receiver carry out its work.

The application also indicated that regulators have found evidence of suspected trading misconduct at the firm, which the OSC’s enforcement division is now investigating.

“[A] preliminary review of Traynor’s trading activity shows some trading without any change in beneficial or economic ownership,” the regulator said in its application.

Additionally, the Canadian Investment Regulatory Organization (CIRO) informed OSC enforcement that several dealers suffered losses — estimated at between $85 million and $95 million — after they “settled trades for Traynor but could not recapture the costs of the trades from one of Traynor’s prime brokers.”

The prime broker, CIBC World Markets Inc., terminated its service agreement with Traynor, “because the firm had become unresponsive.”

One of the dealers, Virtu Canada Corp., has also sued Traynor, seeking damages for the losses it allegedly suffered from its unsettled trades on behalf of the firm.

The OSC has not made any enforcement allegations in the case.