Canadian ETF Slapped With Trading Ban After Failing to Submit Financial Statements

Investors are facing an extended trading ban on 11 ETFs managed by Emerge Canada, after the sponsor failed to meet the deadline for filing financial statements.

The Ontario Securities Commission (OSC) issued a cease trade order on shares managed by Emerge Canada, after the fund failed to file audited financial statements before the March 31 deadline. The ban— a first of its kind to target an ETF, will also cover the creation and redemption of shares, and traders will be prevented from selling their shares on the secondary market.

“The CTO means that while we still actively manage our strategies and performance continues, liquidity cannot be achieved as there cannot be any creations/buys of units or redemptions/sales of units,” explained Emerge Canada CEO Lisa Langley in a statement to the Financial Times. The ETF unveiled in a December filing that its auditor, BDO Canada, withdrew its services “on its own initiative” back in November, leaving the fund scrambling to find a replacement to no avail before the prescribed deadline.

“Due to our shift to a new auditor, our 2022 financial statements missed the filing deadline, and we are working diligently to complete the requirements provided by the OSC,” Langley continued. She added that it remains unknown when the trading will be lifted or whether it will be lifted at all, but assured investors that the ETFs haven’t been wiped out and are still retaining their value because they’re being held by the fund’s custodian, RBC Investor Services.

Emerge Canada has about $109 million in assets under management, offering clients investment opportunities in Cathie Wood’s suite of Ark Invest ETFs, as well as another five ETFs from the EMPOWR range— a series of portfolios ran by women with a “special focus on promoting sustainability, diversity, and equality within industry.” In fact, Emerge Canada self-identifies as the first Canadian “only woman-owned investment fund firm” itself.

Langley went on to explain that BDO Canada’s abdication of auditing services was a mutual decision, and Emerge Canada is currently in the midst of searching for a new auditing partner. However, as per the OSC’s order, the fund cannot resume trading until it has established a new auditor and files its 2022 financial statements.

“This is an unusual sequence of events,” said Morningstar director of passive strategies research Bryan Armour. “The company’s former auditor resigned in November 2022, so it raises the question of why they haven’t replaced the auditor in the five months since.” Armour told the Financial Times that this is the first time he’s heard of such a trading ban targeting an ETF, whilst the OSC, too, said it’s never issued such a suspension against a series of ETFs.

Information for this briefing was found via the Financial Times and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

One thought on “Canadian ETF Slapped With Trading Ban After Failing to Submit Financial Statements

  • May 19, 2023 8:28 AM at 8:28 am

    I can see a class action suit against the management of Emerge in Canada (EARK) and maybe ARK in the USA. Either way it’s not good for either company!!!


Leave a Reply