‘We are deeply disappointed,’ ARK says of Emerge ETFs trading halt

Cathie Wood's investment firm breaks silence, distances itself from embattled Canadian ETF manager

‘We are deeply disappointed,’ ARK says of Emerge ETFs trading halt

A week after regulators ordered a trading freeze on ETFs offered by Emerge, including a handful that follow strategies by ARK Investments, the disruptive innovation-focused US investment manager has spoken out.

“The Emerge Canada ETFs involved in the action from the Ontario Securities Commission (OSC) are not ARK’s funds: ARK is not affiliated with and has no ownership or role in the management of Emerge Canada, nor its ETFs,” a spokesperson for the firm said in an email provided to Wealth Professional.

In the statement, ARK emphasized that the only Canadian ETFs for which it acts as a discretionary manager are the ones offered in partnership with BMO Global Asset Management. Those ETFs, launched last year, cover a different suite of innovation ETFs.

“Importantly, Emerge Canada’s situation is not related in any way to the three BMO ARK ETFs nor ARK’s ETFs and other products in the US and elsewhere,” it said.

“Emerge Canada is an independent sponsor and manager of a Canadian family of funds that Emerge Capital Management (Emerge US) sub-advises,” it continued. “Emerge US is one of many entities with whom ARK has contracts to provide non-binding advice models. In this case, Emerge US uses such models to sub-advise Emerge Canada’s ETFs.” 

The cease trading order (CTO) on the Emerge ETFs arose from Emerge Canada’s failure to file audited financial statements for its ETFs by the March 31, 2023 deadline. The firm had previously engaged BDO as the auditor to its ETFs, but BDO “resigned, on its own initiative” in November, according to a December filing Emerge submitted to regulators.

Responding to the CTO, Emerge said it has been working to find a replacement auditor, and will work expeditiously to fulfill the pending requirements once it does.

“Once our audits are complete, we will file the required documents with the OSC to lift the CTO. We are working diligently to complete this,” Emerge Canada CEO Lisa Langley told WP last week. “Investors can expect an update from Emerge regarding the appointment of an auditor and subsequent progress as we work towards resolving this outstanding matter.”

In its own email, ARK said it only became aware of Emerge Canada’s failures to submit audited financial statements for its ETFs shortly after the issuance of the CTO, “a situation in which we are deeply disappointed.

“ARK is monitoring closely the efforts of both Emerge US and Emerge Canada to obtain a quick and satisfactory resolution and we are prepared to take additional action if warranted or necessitated,” ARK said.

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