Next week, an Ontario court will consider whether to grant the Ontario Securities Commission’s (OSC) application for a receiver to be appointed over an inter-related group of real estate investment vehicles, amid concerns about suspected misconduct.
In February, the OSC applied to the Ontario Superior Court of Justice for an order appointing a receiver over various companies and limited partnerships, that comprise the Cacoeli Group, including Cacoeli Asset Management Inc. and Cacoeli Capital Inc. — which are described in court filings as engaged in private equity real estate investment.
According to court filings, the companies are in the business of acquiring apartment complexes, making capital improvements, raising rents, and selling the buildings for a profit.
In its application for a receivership, the OSC asserts that the company has engaged in misconduct that amounts to fraud, which justifies the group being placed into receivership.
The court initially rejected the regulator’s application on the basis that Cacoeli hadn’t been given enough time to prepare a response.
The hearing on the proposed receivership will now take place on April 22.
In the meantime, the court appointed Grant Thornton Ltd. to the role of monitor over the companies, which has the ability to oversee their ongoing activities, but doesn’t have the broader powers of a receiver.
In its filings in support of its application, the OSC said that it launched an investigation into the Cacoeli Group back in 2023, which uncovered suspected misconduct.
“Pursuant to the investigation, the OSC asserts that the Cacoeli Group may be engaged in fraud in breach of… the Securities Act,” it said in its court filings. Among other things, it asserted that the companies may have misused investor equity in several projects, and may have misused investor funds.
The regulator hasn’t brought any enforcement allegations against the companies, and none of the assertions of alleged fraud in the proposed receivership filings have been proven.
Indeed, in its filings, the Cacoeli Group flatly rejects the regulator’s position.
“Many of the commission’s allegations are demonstrably false,” it said in its filings.
“The evidence is unequivocal that investor equity (as opposed to funds) was deployed towards different projects. But the evidence is equally unequivocal that investors were told about it and were granted interests in the other projects,” it said — adding that these interests were documented in accounting records, “disclosed to investors” and reported to the Canada Revenue Agency in its tax filings.
It also asserted that no investors have complained about any misconduct.
“In short, the evidence contradicts the commission’s claims and, despite its shapeshifting allegations, it cannot meet its evidentiary burden. The application should therefore be dismissed,” it said.