Did these Auditors Just Burn a Bridge?

Several years ago, a friend reached out about a distressing personal matter involving her mother’s retirement savings. Her mother, a client at one of Canada’s “Big Six” banks, had her savings spread across four different mutual funds, and two of those four funds became suddenly frozen. (Note: Mutual funds are pooled vehicles and their underlying assets can be opaque.)

My friend asked whether her mother would ever see her money again.

The issuer was Bridging Finance. At the time, their mutual funds were offered by nearly every major bank and independent broker in Canada.

Around this time, the Ontario Securities Commission (“OSC”) placed Bridging Finance into receivership. It was believed the funds held approximately $2.1 billion in assets under management. However, the receiver later estimated that holders of their mutual funds would only recover a fraction of their initial investment.

By 2024, the Ontario Capital Markets Tribunal found that the principals of Bridging Finance participated in fraud, including the diversion of over $100 million in investor funds. The Tribunal found the conduct to be “among the most serious frauds to come before the Tribunal,” though it is important to note that this case is currently on appeal.

The integrity of our capital markets relies heavily on several gatekeepers to prevent this kind of thing from ever happening. Auditors, who are tasked with verifying financial information with a neutral set of eyes, are a vital gatekeeper.

On March 31, the OSC filed an application for an enforcement proceeding against the auditor of Bridging Finance.

The regulator alleges:

It is important to emphasize that these are unproven allegations at this stage of the enforcement process, and the auditor has issued a formal statement denying the claims. The first hearing is scheduled to take place on May 5.

At Schneider & Pollock Wealth Management Inc., we don’t offer mutual funds. We believe in direct ownership, where every equity you own is publicly traded on a North American exchange. This approach ensures your portfolio is fully transparent, allowing you to see exactly what you own every single day.

-written by Jeff Pollock