OSC still overseeing Emerge Canada

The Ontario Securities Commission (OSC) continues to oversee Emerge Canada Inc. and require that its activities be monitored by a law firm.

AUM Law Professional Corp. has been Emerge Canada’s monitor since Nov. 1, 2023, as part of the terms and conditions imposed by the OSC. AUM’s role is to oversee the wind-down of the ETFs run by Emerge, which were put under an unprecedented cease-trade order in April 2023. AUM did not respond to a request for comment.

“We can’t say for certain how long the monitor will be engaged in the matter. At this time, Emerge Canada continues to owe obligations to certain unitholders of its former funds,” OSC spokesperson JP Vecsi said in an email.

There is movement on the Emerge file nonetheless.

“The OSC suspended the registrations of Emerge Canada on Feb. 12, [2024],” Vecsi said. “While its registration status is suspended, the OSC has oversight until such time that Emerge Canada’s registrations are revoked.”

The OSC also is conducting “an active and ongoing investigation into Emerge Canada.”

Emerge Canada was registered with the OSC as an investment fund manager, portfolio manager and exempt market dealer. On May 11, 2023, the OSC announced it would suspend Emerge Canada’s registrations for capital deficiency, stating that Emerge was likely capital deficient prior to Sept. 30, 2022.

Emerge was, however, permitted to conduct registerable activity only to wind down its business, after which the OSC would suspend Emerge’s registration, the May decision stated.

Former unitholders of five Emerge ARK ETFs are still waiting for updates on the status of the receivable Emerge Canada owes them. As reported by Advisor.ca last year, Emerge’s ARK ETFs were owed more than $2.5 million in receivables from Emerge as of June 30, 2022 — an amount that had grown more than fivefold over two-and-a-half years.

The OSC’s May 2023 decision revealed that the receivable had increased to $5.5 million, which represented about 5% of the assets held in the ARK ETFs at the time.

As of Dec. 29, 2023, $4.7 million remained outstanding. The former unitholders are now unsecured creditors of Emerge Canada.

“We continue to be in communication with Emerge Canada’s monitor on matters such as investor and fund tax reporting, investor communications and any updates on the potential repaying of the receivables,” Vecsi said.

Emerge Canada stated in January that it would arrange for any receivable payments to be made through the Canadian Depository for Securities and notify unitholders on its website when payment had been completed. However, Emerge Canada’s website has been down intermittently since then.

“We’ve made inquiries and understand that Emerge Canada plans to make its website accessible again shortly,” Vecsi said after being told the website was down. “Its website will be used to report updates to investors, if any, regarding the receivables.”

At press time, Emerge Canada’s website was functioning.

Emerge Canada has not released further information about the receivable’s status, and a lawyer for the firm did not respond to requests for comment.

Emerge ETFs timeline

• Nov. 3, 2022: BDO LLP resigns as auditor of the Emerge Canada Inc. funds
• March 31, 2023: Deadline by which Emerge Canada was supposed to file annual audited financial statements
• April 6: Cease-trade order issued on all 11 ETFs managed by Emerge Canada
• April 14: Advisor.ca reports that Emerge Canada’s suite of six ARK ETFs is owed more than $2.5 million in receivables from Emerge
• May 11: Emerge Canada suspended for capital deficiency
• July 14: Liquidation date for the U.S. versions of the five EMPWR ETFs
• August: In documents filed with the Erie County Clerk, a woman hired in February 2022 as an executive assistant with Buffalo, N.Y.-based Emerge Capital Management Inc. alleges she was not paid wages from Dec. 16, 2022, until March 6, 2023
• Sept. 15: Five U.S. EMPWR ETFs apply to the U.S. Securities and Exchange Commission to deregister
• October: Three employees of Emerge Canada Inc. file a notice of motion against CEO Lisa Langley and Emerge Capital Management Inc. for failing to repay nearly US$200,000 they lent the firm earlier in the year
• Oct. 31: Date of Emerge Canada ETF liquidations
• Dec. 20: Pro rata shares paid out to unitholders “on or before” this date; ETFs without receivables terminated
• Dec. 29: Termination date of the five Emerge ARK ETFs with outstanding receivables
• Jan. 5: Emerge announces its unitholders have become unsecured creditors

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.