Emerge Canada loses bid to call several expert witnesses at the merits hearing
A fund manager accused of repeatedly transferring investor money into its own accounts faced a ruling on February 20, 2026, restricting its expert witnesses.
In Ontario Securities Commission v Emerge Canada Inc, 2026 ONCMT 14, the Capital Markets Tribunal issued its order on February 20, 2026, with written reasons following on March 20, 2026. The merits hearing was set to begin on March 23, 2026.
Emerge Canada Inc. was an investment fund manager and portfolio manager that served as trustee and manager of six publicly traded funds. Shortly after the funds launched, the Ontario Securities Commission alleged, Emerge Canada repeatedly caused the funds to transfer money into its own bank accounts and those of its United States affiliate.
The Commission alleged that in making those transfers, Emerge Canada breached its standard of care as an investment fund manager, failed to comply with its obligations respecting conflicts of interest, caused impermissible loans to be made by the funds, failed to maintain an adequate system of controls and supervision, and failed to maintain proper books and records.
Lisa Langley, the firm's Chief Compliance Officer and Ultimate Designated Person, also faced allegations. The Commission alleged that Langley failed to meet her obligations in those roles and that she authorized, permitted or acquiesced in Emerge Canada's breaches of Ontario securities law.
Ahead of the merits hearing, Emerge Canada and Langley planned to call three expert witnesses: Barclay T. Leib on valuation and market practice, Fathi Elloumi on fund operations and governance, and Steven Rostowsky on accounting and audit matters. The proposed testimony would cover asset valuation methodologies, professional judgment in valuing illiquid and complex assets, fund governance and internal control frameworks, the roles of third-party service providers in net asset value calculations, valuation processes, and oversight, the scope of investment fund audits, manager interactions with auditors on valuation inputs, financial reporting, and year-end audit processes, and the valuation and disclosure of net asset value during interim periods.
The Commission brought a motion that sought to exclude the proposed expert testimony, among other relief. The other relief sought was addressed by a separate panel by order dated February 17, 2026. On the expert evidence question, the Commission argued that much of the proposed testimony was not relevant to the allegations. It contended that the enforcement proceeding did not raise issues about asset valuation, net asset value calculations, or audit practices. However, it conceded that supervisory practices, record-keeping, internal controls, and compliance systems were placed in issue by the allegations.
The Tribunal had ordered Emerge Canada and Langley to file further written submissions by February 13, 2026, explaining the relevance of each proposed expert's testimony to the specific allegations in the enforcement proceeding. Emerge Canada and Langley did not deliver any such submissions on that date or at any time thereafter. The Tribunal accordingly proceeded to decide the motion on the materials already before it.
The Tribunal granted the motion in part. It ruled that expert testimony on asset valuation methodologies, professional judgment in valuation, industry standards for assessing valuation approaches, third-party service provider roles in net asset value calculations and valuation processes, the scope and purpose of investment fund audits, manager interactions with auditors on valuation inputs and year-end audit processes, and the valuation and disclosure of net asset value during interim periods was not logically relevant to the allegations and therefore inadmissible.
However, the Tribunal declined to exclude expert testimony on fund governance, oversight, and internal control frameworks, the oversight role of third-party service providers, how fund managers rely on those providers, and manager interactions with auditors on financial reporting. The Tribunal found these issues were raised by the allegations, albeit without much particularity, as the Commission itself conceded. It concluded it was premature to determine whether such evidence was unnecessary or whether the proposed experts lacked qualifications, deferring those questions to the merits hearing. All parties retained the right to raise or renew objections at that stage.
The February 20 order also set a timetable for expert reports. Emerge Canada and Langley were required to serve their expert reports by February 28, 2026, with responding reports from other parties due by March 16, 2026, and reply reports from Emerge Canada and Langley due by March 20, 2026.
