Canadian Regulators Order Shutdown of ARK ETFs

Canadian Regulators Order Shutdown of ARK ETFs

The likely demise of the Emerge ARK ETFs leave Canadian investors with fewer options to invest with Cathie Wood.

sumit
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Senior ETF Analyst
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Reviewed by: Lisa Barr
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Edited by: Lisa Barr

Investors in a handful of Cathie Wood-affiliated exchange-traded funds listed in Toronto are going to have to find some other way to invest with the popular fund manager.  

Last week, Canadian regulators ordered the company behind the ETFs, Emerge Canada Inc., to wind down the funds after it failed to comply with regulatory working capital requirements.  

The order means that six Emerge ARK ETFs will likely be shut down, including the largest of the bunch—the Emerge ARK Global Disruptive Innovation ETF (EARK), with C$76 million Canadian in assets under management (US$56 million). 

The Emerge ARK ETFs are subadvised by ARK. “ARK provides daily investment recommendations for each of our 6 Emerge ARK ETFs,” Emerge says on its website. 

EARK has closely tracked the performance of the U.S.-listed ARK Innovation ETF (ARKK).  

Alternatives 

Emerge has come out strongly against the order to wind down its funds. A spokesperson for the company told Bloomberg that a press release responding to the order is forthcoming.  

But it’s unclear what Emerge can do to prevent the closure of its funds. Canadian regulators said the firm had a working capital deficit of as much as $4.5 million versus the surplus of $100,000 it needs to maintain its registration as an investment fund manager.  

The likely shuttering of the Emerge ARK ETFs would make it slightly more difficult for Canadian investors to invest in ARK’s strategies. Instead of purchasing Canadian-listed ETFs, those investors will have to purchase the original U.S.-listed ARK ETFs, like the aforementioned ARKK. 

This is relatively simple to do using most Canadian brokerages, though it may be more costly.  

On its website, ARK advised investors seeking to invest with it to consider the Emerge ARK ETFs.  

Meanwhile, Emerge noted that Canadian-domiciled and Canadian listed ETFs are better suited for Canadian residents “because it is not considered U.S. property and you benefit from Canadian listed ETF tax advantages.” 
 
 

Contact Sumit Roy at [email protected] 

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.