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Ontario unveils emerging market probe

Tuesday 5 July 2011 - by Will Henley

Canada's main securities regulator has said it is reviewing the auditing and reporting practices of exchange-listed firms which have "significant" emerging market operations.

The Ontario Securities Commission announced the "targeted review" on Tuesday afternoon, saying it said would closely examine disclosures as well as the vehicles used to access the Toronto market.

It added that its supervisors would zero-in on the role of the auditors and underwriters.

The move follows an OSC investigation into allegations by short seller Muddy Waters that a forestry company with assets in China, Sino-Forest Corp, may have manipulated market data.

"This targeted review is part of our ongoing effort to protect investors and strengthen market integrity," said OSC chair and chief executive Howard Wetston, although he did not reference the Sino-Forest case.

"Issuers who access our market, and the advisors who support them, have important responsibilities to investors and we will take regulatory action as warranted to ensure these responsibilities are met."

The regulator said that it had already contacted some issuers and will continue to do so over the coming weeks.

Other Canadian authorities, such as the Investment Industry Regulatory Organization of Canada and the Canadian Public Accountability Board, are also likely to be contacted, it said.

"Once the review is completed, the OSC will consider whether the findings have broader policy implications for the regulatory regime in Ontario, given the increasingly globalised marketplace," it added.

Sino-Forest Corp has denied the allegations against it.

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