An investment fund manager is being accused of violating securities rules by operating without registration for 10 years.
The Ontario Securities Commission (OSC) has scheduled a hearing for Nov. 27 to hear allegations against Daniel Sheehan, who is accused of acting as an investment fund manager between 2009 and 2019, trading and advising, without being registered.
The allegations have not been proven.
According to the OSC’s statement of allegations, Sheehan functioned as an unregistered fund manager by operating an investment vehicle — Sheehan Associates Limited Partnership (SALP) — that sold units to investors. The vehicle gave individuals the opportunity to participate in returns generated from his discretionary securities trading.
“Sheehan operated SALP as an investment fund, giving its investors exposure to Sheehan’s securities investment ideas and trading activity,” the regulator said in its allegations.
“During this time, SALP carried on no business other than pooling investor assets to be invested in a portfolio of publicly-traded securities, which Sheehan managed exclusively, and for which he was compensated,” the OSC said.
The allegations don’t suggest that investors suffered any losses from the alleged unregistered trading.
In fact, they report that in April 2019, the LP returned the investors’ capital plus their share of its investment returns (net of performance fees), the regulator said.
According to the allegations, under the structure of the vehicle, Sheehan was paid a performance fee amounting to 25% of returns above the 6% mark — if he did not generate a minimum 6% compounded annual return over a rolling five-year period, he had to return fees to ensure that investors received at least a 6% return.
However, the regulator said, “SALP always earned in excess of a minimum 6% compounded annual return over any given five-year period and therefore, Sheehan was never required to repay any of his performance-based profits to SALP’s limited partners.”
The allegations indicate that the SALP raised over $40 million from approximately 50 investors in Ontario, and that it collected approximately $21 million in performance fees.