The Ontario Securities
Commission today published a Staff Notice
outlining areas of concern relating to emerging market issuers. As
we discussed last summer, the OSC
recently undertook a targeted review of Ontario reporting issuers
with significant business operations in emerging markets following
the disclosure-related allegations made against Sino-Forest.
According to the OSC, the regulator wanted to "ensure that any
systemic or specific issues" affecting such issuers were
addressed in light of the importance of emerging market issuers in
the Canadian and global marketplace.
To that end, the OSC reviewed 24 issuers ranging across various
industries such as mining, forestry, financial services and
technology. Among other things, the review involved an examination
of the public disclosure records of the selected issuers, as well
as examinations of board and audit committee activities.
Ultimately, the OSC identified four principal concerns arising
from its review, namely with respect to: (i) the level of issuer
governance and disclosure; (ii) the adequacy of the audit function
for annual financial statements; (iii) the adequacy of the due
diligence process conducted by underwriters in offerings of
securities; and (iv) the nature of the exchange listing approval
process. Of particular interest, the OSC noted that it is concerned
that emerging market issuers may be employing an approach of
"form over substance" with respect to compliance.
Meanwhile, the OSC also noted that the fact that many of the
issuers had little presence in Canada contributed to a
"separation" between management functions in the emerging
market jurisdiction and Canadian governance.
Ultimately, the report provides a list of recommendations to
guide emerging market issuers, their auditors and underwriters and
exchanges in addressing the OSC's concerns. For more
information, see OSC Staff Notice
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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