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The investment advisory firm co-founded by Gary Ng was teetering on insolvency and operating under strict regulatory supervision in the years before the 36-year-old financier swooped in and made the surprise acquisition of PI Financial Corp. for $100-million, court records show.

Chippingham Financial Group, Mr. Ng’s first foray as an owner in Canada’s investment dealer business, was in such perilous financial shape in late 2016 that the Investment Industry Regulatory Organization of Canada barred it from making a $15,000 loan payment, court records show. IIROC was concerned the payment would plunge Chippingham into “early warning” status – a designation used to describe capital deficient firms, court records show.

Other court records show that when about a dozen advisers left Chippingham in 2015, its revenue collapsed by more than 50 per cent. Mr. Ng and Chippingham’s co-founder, Sepoy Wong, had to inject a total of $800,000 to “avoid insolvency,” the records show.

The records show that Mr. Ng was on the radar of IIROC long before it accused Mr. Ng of fraud in a set of sensational allegations released two weeks ago, and raise questions about how Mr. Ng has portrayed his track record in the investment advisory business.

On Nov. 24, IIROC accused Mr. Ng of doctoring numerous account statements to falsely inflate his net worth and persuade lenders – who the regulator has declined to identify – to finance his acquisition of PI, a mid-sized investment bank and wealth manager based in Vancouver.

Mr. Ng falsified his own securities accounts to make it appear they held much more than they did, and two clients’ account statements were altered to look like they belonged to Mr. Ng, IIROC alleges. In addition, Mr. Ng allegedly created fictitious accounts, which made it look like he had millions with Chippingham and PI, “when in reality those accounts and the claimed assets did not exist,” IIROC alleges. The account statements were used as collateral for the loans, which were used to acquire PI and for other purposes.

In total, Mr. Ng and his holding company borrowed $172-million from three lenders from November, 2018, to January, 2020, using the falsified collateral, IIROC alleges. The PI acquisition was made by Mr. Ng’s holding company.

IIROC has also accused Mr. Ng of failing to attend a scheduled interview with its investigators in July. Mr. Ng did not respond to requests for comment for this story.

In a statement to The Globe and Mail, IIROC said that Mr. Ng was personally served on Nov. 5 in Winnipeg with a notice about his upcoming disciplinary hearing.

Mr. Ng has been portrayed on his website and in the media as a financial wunderkind. When he acquired PI in 2018, he described, in media interviews, his ascent from a futures trader to the founder of Chippingham, which he said started as a small office in Toronto in 2012, before expanding across the country. A BNN Bloomberg article at the time of the PI purchase said that he described himself as an “admiral” who had amassed a “fleet” of independent financial firms.

But a review of litigation involving Mr. Ng and Chippingham suggests the voyage has not been smooth.

A former Chippingham fixed-income trader, Aaron Laidlaw, sued Mr. Ng and Chippingham in 2015 when the company failed to repay him a $950,000 loan. In November of that year, Mr. Laidlaw applied to have a court-ordered receiver oversee Chippingham’s affairs, but aborted his application when Mr. Ng agreed to a loan repayment schedule. The schedule called for monthly payments “equal to 50 per cent” of Chippingham’s profit, court records show.

The schedule, and each monthly loan payment, were subject to approval by IIROC, court records show.

In late 2016, though, Chippingham failed to make a scheduled $15,000 payment. When Mr. Laidlaw sued again, Chippingham acknowledged in court filings that IIROC denied its request to make the payment because Chippingham “appeared close to ‘early warning,’ ” court records show. Chippingham defined “early warning” as a series of financial tests that measure whether a firm is “capital deficient pursuant to IIROC’s rules.”

The court filings don’t indicate what became of Mr. Laidlaw’s lawsuit or the loan. He did not respond to a request for comment.

In June of this year, Mr. Ng and Chippingham became embroiled in another lawsuit in Vancouver involving Chippingham’s co-founder, Mr. Wong.

Mr. Wong’s sister, Flora Wong-Vasquez, alleges their late parents were shareholders in a company, Chippingham New Providence Co. Ltd., controlled by Mr. Ng and Mr. Wong. She alleges the company fraudulently conveyed $1.7-million to Chippingham Financial Group. She is seeking a court order to trace the funds.

In response to his sister’s claim, Mr. Wong denies that he acted improperly. In court filings, he explained that the financial affairs of Chippingham Financial Group deteriorated in 2015, when an exodus of about a dozen investment advisers depleted it of more than 50 per cent of its revenue. Mr. Wong said that, “in order to avoid insolvency,” he made an advance of more than $500,000 to Chippingham Financial, and that Mr. Ng made an advance of more than $300,000.

Chippingham Financial’s remaining assets – which included client accounts with around $200-million under management – were sold to PI in early 2019, shortly after Mr. Ng acquired control of PI and became the firm’s executive chairman. Chippingham then resigned its registration as an IIROC dealer.

In court filings, Mr. Wong said the assets were sold because Chippingham could no longer meet IIROC “regulatory requirements” and could “no longer viably operate as a brokerage business.” Mr. Wong’s lawyer did not respond to a request for comment.

In a statement to The Globe, IIROC said it was “not in a position” to comment on Mr. Ng’s history with Chippingham. As for Mr. Ng’s purchase of PI, the regulator said that whenever an IIROC-regulated firm changes ownership, it engages in a detailed review that includes whether “the purchaser, in their new role, meets IIROC’s proficiency and registration standards.”

In a statement, a spokesman for PI Financial said the company’s acquisition of Chippingham’s client accounts received regulatory approval. “We did not know of financial challenges at Chippingham and nor were they relevant to PI in an asset transaction.”

Mr. Ng is no longer the owner or chairman of PI. Ownership of the firm was transferred to H.I.G. Capital and RCM Capital Management in July.

With a report from Clare O’Hara in Toronto