Embattled ETF manager’s unitholders now left as unsecured creditors

In April of 2023 Emerge ETFs were placed under a cease-trade order by the Ontario Securities Commission (OSC) after the ETF provider failed to file its annual audited financial statements. In May of 2023 the OSC suspended Emerge’s registration, citing the receivable owed to the five Emerge ARK ETFs which at the time had grown to $5.5 million.

By December 20th, Emerge told unitholders the receivable had been reduced by around $800,000 to $4.7 million. The receivable has been accruing interest at 2.5% per year since 2020.

Read more: Record delistings mar 2023 growth for Canadian ETFs | Wealth Professional

Emerge is currently the subject of a class action lawsuit by the firm Kalloghlian Myers LLP which notes that the receivable owed to the five ETFs was accrued as a pre-payment of management fees from the ETFs to Emerge Canada Inc. — meaning Emerge effectively borrowed from their own ETFs’ assets under management.

All five of the Emerge ETFs still owed a receivable were liquidated on October 31st of last year, and were terminated on December 29th following non-payment of the receivable. This has left the unitholders of those five ETFs as unsecured creditors of Emerge Canada Inc.    

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