Canada: OSC Releases Results Of Its Emerging Markets Issuer Review

On March 20, 2012, the Ontario Securities Commission (OSC) published Staff Notice 51-719 Emerging Markets Issuer Review that summarizes the OSC's review of emerging market issuers (EM Issuers) and outlines principal sources of concern relating to issuer governance and disclosure, underwriter conduct, the role of auditors and the exchange listing process.

The review was initiated by the OSC in July 2011, in response to concerns that investors in EM Issuers may be exposed to inappropriate risks. For the purposes of conducting this review, OSC staff considered a number of criteria in determining whether a reporting issuer was an EM Issuer. Staff focused on issuers with the following characteristics:

  • whose mind and management are largely outside of Canada; and
  • whose principal active operations are outside of Canada, in regions such as Asia, Africa, South America and Eastern Europe.

The report outlines the main areas where improvement is required and where the OSC expects to see concerted action taken by issuers, underwriters, auditors and exchanges in order to protect investors and uphold the integrity of public disclosure.

Specifically, and of particular interest to EM Issuers, the OSC will examine ways to, among other things:

  • improve corporate governance practices of boards of emerging market issuers;
  • develop transparent and consistent due diligence requirements for underwriters;
  • enhance disclosure of risk factors and complex corporate structures relevant to emerging market issuers; and
  • work with the exchanges to enhance the listing process to address the unique concerns raised by emerging market issuers.


Issuers listed on the TSX, TSXV and CNSX as at April 30, 2011, and having headquarters in jurisdictions other than Canada, the US, the UK, Western Europe, Australia and New Zealand, totalled 108 with a total market capitalization of approximately C$40 billion. This was in contrast to a total of nearly 4,000 exchange-listed reporting issuers in Canada, having a total market capitalization of C$2.39 trillion.


OSC Staff expects that EM issuers, their auditors, underwriters and other advisors, as well as the exchanges, will address the concerns identified in their review and will, where necessary, take immediate steps to improve their practices to effectively discharge their responsibilities to protect investors. OSC staff set out a list of recommendations for further work needed to address their principal concerns which, in most cases, do not involve the creation of new policies or rules but instead involve the development of guidance, best practices or enhanced vigilance to support compliance with current requirements.

EM Issuers

The recommendations with respect to EM Issuers include:

  • Corporate Governance Practices - establish guidelines related to the responsibilities of the board and its committees in order to fully understand the business, operating environment and risks for EM Issuers. To the extent the board has limited experience in the cultural and business practices of the foreign juris diction, their manner of oversight must be adjusted to mitigate the risks that may arise as a result of this lack of understanding. Some suggestions include obtaining translations of key business documents instead of relying on local management and requiring a minimum level of competency in the foreign language for Canadianresident board members.
  • Corporate Structures - provide detailed disclosure to investors of complex corporate structures and their purpose as this will promote a better understanding of the management and operations of the EM Issuer and reduce the risk of an organization structure that facilitates inappropriate activity, such as fraud or misappropriation of assets, or misrepresentations about an EM Issuer's financial performance or condition.
  • Risk Management - internal controls should be adjusted to reflect the particular risks of having significant business operations located in an emerging market, including: (a) political factors, such as government instability and changing governmental policy that may affect legal rights, such as property ownership; (b) the legal and regulatory framework, given that emerging market jurisdictions may have less developed legal or regulatory systems; (c) the movement and conversion of currency out of the foreign jurisdiction, which could hinder the repatriation of profits to Canadian investors; and (d) legal title to assets.
  • Disclosure of Risks - requiring better explanations of risk factors relevant to EM issuers and raising investor awareness of risks associated with investments in issuers whose principal operations are in foreign jurisdictions.


As part of the review, OSC Staff recommended that underwriters should participate in the offering process with a healthy amount of skepticism regarding management claims and develop a full understanding of an EM Issuer's finances, management, operations, industry and country of origin. Underwriters should also document their findings in a clear and concise manner.


OSC Staff were concerned that auditors may not have undertaken sufficient procedures to understand and appropriately scrutinize the information provided to them by an EM Issuer and/or foreign 'component' auditors. OSC Staff recommended, among other things, working with the Canadian Public Accountability Board to analyze whether securities rules could be enhanced to allow more information sharing in connection with the oversight of audit firms and examining whether suitability standards for auditors of reporting issuers should be developed.


We understand that the TMX Group is in discussions with other institutions and market participants, including the various Canadian securities commissions, the Canadian Public Accountability Board, auditors and investment bankers with a view of implementing new guidance, procedures or requirements for EM Issuers to complement existing rules and working practices. Areas of focus are expected to include additional details regarding senior management and director qualifications, corporate governance matters, and disclosure and financial reporting expectations.


Heenan Blaikie has significant experience in connection with raising capital in Canada and compliance with applicable Canadian securities legislation by emerging market issuers. If you have any questions on the subjects addressed in this Securities E-News or would like assistance in assessing the burdens and restrictions that emerging market issuers and investment dealers face in trying to complete a prospectus offering, please feel free to contact us.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.