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David and Natasha Sharpe, of Bridging Finance Inc. are photographed in the company's downtown Toronto offices on April 11 2019.Fred Lum/The Globe and Mail

The husband and wife duo who ran Bridging Finance Inc. are no longer with the company after its receiver terminated chief executive officer David Sharpe and chief investment officer Natasha Sharpe.

A week ago, Bridging Finance was placed under the control of a receiver, PricewaterhouseCoopers LLP, following allegations that the money manager improperly used investor funds to benefit some of its founders and executives. At the time, Mr. Sharpe was suspended from his role and Ms. Sharpe remained with Bridging.

The Ontario Securities Commission is still investigating the matter, but PwC is not waiting for its full findings and has removed Mr. Sharpe and Ms. Sharpe from their respective roles.

Opinion: Bridging receivership highlights the risks in private-debt investing

“The decision of the receiver is regrettable but not surprising,” Mr. Sharpe wrote in an e-mailed statement. “Notwithstanding our termination, we will cooperate with the receiver to the extent possible in the interests of investors while we address the OSC’s misguided allegations.”

Ms. Sharpe remains a co-owner of Bridging, holding a 42 per cent stake in the private debt manager.

The OSC also disclosed Friday that the scope of its investigation is widening, with the watchdog probing to see if some Bridging officers and directors, including Mr. Sharpe, perpetrated a fraud on unitholders. The OSC is also looking into whether certain officers made misleading or untrue statements to the regulator.

The OSC originally alleged that Bridging misappropriated $35-million from an investment fund it manages to complete an acquisition for its own benefit; that Mr. Sharpe received $19.5-million into his personal chequing account from a client to whom Bridging had lent more than $100-million; and that Bridging lent $32-million to a borrower two weeks before the same borrower bought a 50-per-cent stake in Bridging.

The regulator is also investigating to see if Bridging failed to make complete or timely disclosure of these issues to investors.

Full details of the OSC’s original request for receivership have not been made public, but the regulator has said its probe and putting the company under control of PwC is “necessary to protect investors from serious and ongoing harm and is in the public interest.”

In an exclusive interview with the Globe this week, Mr. Sharpe acknowledged that Bridging needs to beef up its investor disclosures, but added that he was mystified by the move to put his company under the control of a receiver. “The need to put in a receiver is perplexing,” he said. “We are stunned by this.”

Mr. Sharpe said he found out Bridging was being put into receivership last Friday around 10:30 p.m., the day after he was interviewed at length by an OSC forensic accountant and an OSC lawyer about a complex web of payments and loans between Bridging, some major borrowers, and himself. The interview was his second extensive examination with the OSC in six months

Bridging, which specializes in private debt and manages roughly $2-billion in assets, has exploded in growth since it was founded in 2012. The money manager got its start providing alternative lending, known as bridge loans, to middle-market companies considered too risky for traditional bank financing. Much like other private-credit lenders, Bridging has attracted many high-net-worth investors who are hunting for yield in an era of low interest rates.

The OSC’s probe is ongoing but the regulator said it has uncovered “serious misconduct” in connection with Bridging loans to three different borrowers, each worth more than $100-million. In two cases, the OSC has alleged money flowed directly to Mr. Sharpe and his wife, Natasha, who co-owns Bridging with road paving magnates Jenny Coco and Rock-Anthony Coco, after investors’ funds were advanced.

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