Regulators have issued a trading halt on Traynor Ridge Capital Inc., an investment fund manager that appears to be facing serious financial difficulties after three failed trading orders and the death of its founder.
On Monday, the Ontario Securities Commission issued a cease trade order (CTO) on Traynor Ridge Capital’s registration as a portfolio manager and investment fund manager, as well a halt on trading in any securities by the firm and in the securities of its fund family known as TR1 Funds.
In a release, the OSC says it is investigating the financial condition of the firm and the events surrounding a series of failed trades that have “potential losses” between $85-million to $95-million.
“It appears to the Commission that Traynor is in serious financial difficulty and may be capital deficient,” the OSC says.
The temporary CTO follows the sudden death of Traynor’s sole director, officer and shareholder, Chris Callahan, which was reported Saturday to the OSC by his former lawyer. Traynor is now without an ultimate designated person and chief compliance officer, and without a director or officer in charge of the firm.
Prior to Traynor, Mr. Callahan – who graduated from Queen’s University in 2014 – worked as an associate portfolio manager at HGC Investment Management Inc. and an analyst at Echelon Wealth Partners Inc.
Founded in 2020, Traynor Ridge is a Toronto-based alternative investment management firm that manages about $95-million in assets within three funds: TR1 Fund, TR1-I Fund and TR1 Fund LP. The company could not be reached for comment on Tuesday.
While investment managers hold their main trading account at a prime broker – in Traynor’s case, CIBC World Markets Inc. – they can place orders with other firms, called introducing firms.
In its release, The OSC says that during the week of Oct. 23, three unnamed “introducing” firms executed trades for Traynor, but when they turned to their own unidentified “carrying” broker to collect payment, the carrying broker could not recoup the costs of the trades. As a result, the three dealers have potential losses amounting to approximately $85-million to $95-million, the OSC says.
The OSC says CIBC World Markets has terminated its brokerage service agreement because the firm has not responded to its inquiries. CIBC declined to respond to The Globe and Mail’s request for comment.
The OSC declined to comment on whether there has been any harm to retail investors’ money.
One of Traynor’s largest investors is Westcourt Capital, a Toronto-based wealth management company that oversees about $5-billion in assets for ultra-high-net-worth families.
Westcourt Capital chief executive officer David Kaufman confirmed to The Globe that Westcourt’s clients represent a “significant portion of the assets” at Traynor Ridge.
“Westcourt is shocked and saddened by the tragic turn of events as outlined in the OSC’s CTO,” Mr. Kaufman said in an e-mail. “We are diligently trying to collect any relevant information to determine the effect that these events may have had on client accounts.”
In recent years, Mr. Kaufman said, Westcourt submitted “ordinary-course” purchases and redemptions into Traynor Ridge funds on behalf of its clients, but the company had submitted no redemption requests during the month of October.
The OSC order prohibits Traynor from trading securities for itself or its funds, reducing its capital, repaying debts, or making any payments – including loans, advances, bonuses, dividends or distribution of assets – to any director, officer, partner, related company or affiliate.
Clare O’Hara
David Milstead
Tim Kiladze