OSC Publishes Results of Review of Emerging Market Issuers

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On March 20, 2012 the Ontario Securities Commission (“OSC” or the “Commission”) released a staff notice summarizing the findings of the Commission’s review of emerging market (“EM”) issuers. With the growing importance of EM issuers to the Ontario economy, OSC’s review was prompted by recent concerns involving certain high profile EM issuers. In summary, the review articulated four main areas of concern:

(1) Concerns regarding issuer governance and related disclosure: OSC’s review yielded recommendations for improved corporate governance practices and better disclosure regarding corporate structure and risk factors. The OSC also recommended that EM issuers maintain appropriate books and records in Canada, and consider both minimum local language competency and Canadian director residency;

(2) Concerns regarding the audit function for an EM issuer’s annual financial statements: The Commission’s recommendations included, among others, facilitating access to audit working papers of Ontario reporting issuers, and examining whether suitability standards for auditors should be developed;

(3) Concerns regarding adequacy of the due diligence process conducted by underwriters in offerings of securities by EM issuers: OSC review recommended that a transparent set of requirements and best practices for the conduct of due diligence by underwriters be established; and

(4) Concerns regarding the exchange listing process. The Commission’s review recommended that exchanges review their current listing and approval requirements with a view to determine whether more stringent listing requirements would be appropriate for EM issuers.