The provincial regulator raised concerns Tuesday about corporate governance and the work done by auditors and underwriters, as well as the exchanges where companies with major operations in emerging markets are traded.
"Issuers who access our market and the advisers who support them have important responsibilities to investors and we will take regulatory action as warranted to ensure these responsibilities are met," Howard Wetston, chairman and chief executive of the OSC, said in a statement.
The review was started last year after accusations of fraud were made against Chinese timberland company Sino-Forest Corp. (TSX:TRE). The company has denied the allegations, but its shares remain halted on the Toronto Stock Exchange.
Shares in Sino-Forest plunged after Muddy Waters Research accused the company of being a massive fraud in what became one of the biggest scandals on the Toronto market in recent years.
The company, which was once the most valuable forestry firm on the Toronto Stock Exchange, has denied the allegations, but its shares remain halted amid investigations by the OSC and the RCMP.
Commission staff selected and reviewed 24 companies with operations in emerging markets that were listed on Canadian exchanges for its report that suggested that more work is needed to be done by all involved to improve compliance with regulatory obligations.
It recommended that stock exchanges assess whether additional listing requirements are needed for emerging market companies to address specific risks associated with them, or if additional review procedures are required.
As well, the report said underwriters should establish a consistent and transparent set of requirements for the conduct of due diligence, while it raised concerns that auditors were not skeptical enough.
Sino-Forest (TSX:TRE) wasn't the only Chinese company listed on the Toronto Stock Exchange to face allegations of fraud last year.
Silver miner Silvercorp (TSX:SVM) was hit with anonymous allegations of fraud and auditors at Chinese shoe manufacturer Zungui Haixi Corp. (TSXV:ZUN) suspended their work and advised the company's audit committee that an independent investigation was warranted.
And while an investigation by KPMG Forensic Inc. confirmed Silvercorp's financial reporting and accounting as accurate, Zungui Haixi has done little to defend itself.
The regulator raised concerns that the boards and audit committees in certain cases fell short in their oversight of management.
"For example, in some cases it appeared that the board had very little contact with senior management in the emerging market jurisdiction running the business," the report said.
"We were concerned with the extent of knowledge of boards and audit committees of the cultural and business practices of the jurisdictions in which the issuer operated."
TMX Group (TSX:X), the operator of the Toronto Stock Exchange and TSX Venture Exchange, said Tuesday it takes its responsibilities seriously.
The stock exchange operator is conducting its own review with listed companies and others and plans to provide additional guidance to emerging markets issuers soon.
The guidance will include additional detail regarding senior management and director qualifications, corporate governance matters and disclosure and financial reporting expectations.
"With the growth of emerging market economies, issuers and investors from these markets are expected to increasingly seek opportunity in Canada and other developed economies around the world," said Kevan Cowan, president of TSX Markets and group head of equities.
"The work currently being conducted by TMX Group is part of our ongoing efforts to enhance the quality and integrity of Canada's capital markets, a key competitive advantage both for us and for Canada."