Follow-Up Review of EMIs Listed in Canada Needed

In response to Aequitas NEO Exchange’s consultation on proposed listing manual amendments to permit the listing of Emerging Market Issuers (EMIs), FAIR Canada recommends that Canadian securities regulators conduct a follow-up review of EMIs that are listed on Canadian exchanges and have significant business operations in emerging market jurisdictions to determine if the OSC’s 2012 recommendations and guidance, and the present listing standards on Canada’s exchanges, have addressed the systemic issues that were identified. Is the quality and adequacy of EMI disclosure and corporate governance practices where we want it to be, and are the EMI gatekeeper roles played by auditors, underwriters and exchanges being discharged in a manner that results in adequate investor protection and integrity of our markets?

FAIR Canada urges the follow-up review to include: (i) benchmarking to other jurisdictions’ approaches to addressing issues related to EMIs; (ii) conducting an empirical analysis regarding the amounts raised in Canada by EMIs and their share price and market capitalization performance over time; and (iii) an analysis of the difficulty Canadian regulators presently face in dealing with compliance and the requisite investigation of and enforcement action against EMIs, including the costs associated with regulating EMIs as well as the difficulties in pursuing criminal enforcement of fraud against EMIs.

Experience has shown that Canadian regulators are often not able to mandate compliance, conduct proper investigations, or take effective enforcement action against EMIs and their directors and senior management. Furthermore, the investigations tend to be very costly compared to domestic investigations.

FAIR Canada recommends that EMIs not be listed unless there are adequate arrangements between Canadian and the EMI’s principal securities regulator to ensure the ability of Canadian regulators to effectively investigate and take enforcement action if necessary.

FAIR Canada believes that in order to ensure the integrity of our markets and adequate investor protection and confidence in our markets, it is appropriate to review the steps that have been taken to address the significant issues that have been previously identified with Canadian listed EMIs and see the extent to which gaps still remain. To review the full submission, click here.

December 13, 2017