metal scales of justice in court room

The judge in the Bridging Finance Inc. (BFI) case is calling on the firm’s receiver to help identify legal counsel to represent investors.

Last week, Chief Justice Geoffrey Morawetz of the Ontario Superior Court of Justice approved a process for possibly selling some, or all, of the assets of the troubled fund manager, BFI, and its funds — which was proposed by the firm’s receiver, PricewaterhouseCoopers Inc. (PwC).

PwC was appointed receiver of the firm in April, at the request of the Ontario Securities Commission (OSC), which continues to investigate possible irregularities in transactions involving the firm’s funds.

The OSC has now cease-traded the funds until Dec. 31.

In the meantime, PwC is exploring the possible sale of its assets in an effort to maximize recovery for the funds investors as well as others with a stake in BFI — a process that requires court approval.

On Friday, the judge’s reasons for approving PwC’s proposed two-stage sale process were released.

In those reasons, Morawetz said that the legal test for approving a sales process, including considerations of fairness, transparency, and efficacy, are met by the proposed process.

The court also approved the disclosure of certain confidential information to possible buyers as part of the sales process, saying, “I accept the receiver’s submission that the best interests of investors may be jeopardized if the receiver is unable to properly market the business and property by making reasonable disclosure of borrower information to a limited number of qualified bidders.”

The reasons also noted that it’s expected that PwC will recommend that the court appoint legal counsel to represent certain investors in the case.

Following an earlier hearing, Morawetz declined to appoint counsel for investors, citing the continued uncertainty about the financial status of funds. Whether investors in different funds may end up having conflicting interests was also a factor.

To date, PwC has been unable to provide a reliable net asset value (NAV) for the various BFI funds due to concerns about certain transactions involving the funds.

In a previous ruling, Morawetz indicated that the court would revisit the question of appointing legal counsel to represent investors after 60 days; giving PwC more time to investigate the financial status of the funds. That 60-day period expires on Aug. 22.

In his latest ruling, the judge noted that it’s expected that PwC will now recommend that the court appoint counsel to represent investors.

“In my view, it would be helpful if the receiver takes a proactive approach in identifying the proposed scope of the retainer for representative counsel and to identify interested counsel for this appointment, when it files its next report,” he said in his decision.