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TORONTO (Reuters) - TMX Group (X.TO) is not duty bound to minutely vet or audit foreign companies that seek to list in Canada, Thomas Kloet, the head of the Toronto Stock Exchange's parent, said on Friday.
"We have listing standards," said Kloet in an interview with Reuters. "We depend on the cadre of representatives from the listed issuer that bring them to market, that's our role."
"Our role is not as the auditor or the financial supervisor of listed companies," he added. "And it's really important that people understand that."
Both the TMX and Canadian regulatory bodies have come under pressure as numerous Chinese companies with Canadian listings have recently seen their stocks plummet amid charges of fraud, accounting irregularities, delayed filings and other issues.
Some have argued that Toronto's listing requirements do not provide for adequate shareholder protection, as the firm's own financial performance is dependent on it being able to attract new listings that in turn boost revenues.
Sino-Forest TRE.TO, until recently the largest forestry company listed in Canada, has been the most prominent of the companies to come under scrutiny. The company, which owns forest plantations in China, was accused of exaggerating the size of its forestry assets by short seller Carson Block and his firm Muddy Waters in early June.
The stock has fallen more than 75 percent since then and it was eventually suspended by the Ontario Securities Commission a few weeks ago, after the regulator said an investigation showed some signs of fraud. The cease-trade will remain until January 25, pending the results of a thorough probe.
Zungui Haixi ZUN.V, a China-focused sportswear maker, is another of the companies under investigation. Its auditor Ernst & Young, warned last month about inconsistencies in Zungui bank documents and regulators suspended the stock on August 23.
Kloet argues that both the Toronto Stock Exchange and the TSX Venture Exchange already have "a pretty robust review process."
"What we will do is continue to monitor our approach to what kind of companies we list, but I think that the process we have right now is pretty robust and effective."
Shares of TMX ended the day up 40 Canadian cents at C$40.94 on Friday on the Toronto Stock Exchange.
Reporting by John McCrank and Pav Jordan; writing by Euan Rocha; editing by Rob Wilson