TORONTO (Reuters) - Sino-Forest, the Chinese forestry company whose stock collapsed after a short-seller’s fraud accusations, said on Monday that Canada’s top securities regulator found that its conduct ran afoul of sections of securities law pertaining to fraud.
The Ontario Securities Commission made its findings known to Sino-Forest by serving the Toronto-listed company and some of its current and former executives with enforcement notices, the company said in a statement on Monday.
Sino-Forest provided few details about the notices but said the matters in question were “of a serious nature.” It signaled the OSC was considering formal allegations pertaining to false or misleading statements and possible fraud.
The case is the most prominent among a spate of accounting scandals that have tainted the image of Chinese companies listed in North America. The accusations have prompted trading halts, delisting, lawsuits and regulatory probes in both the United States and Canada.
The OSC typically issues enforcement notices near the end of an investigation. Their purpose is to give respondents a chance to point out any special circumstances that may influence a decision on whether to issue formal allegations and schedule a hearing.
The OSC confirmed that it issued notices in the Sino-Forest matter but provided no further details, saying its investigation is still underway.
Its probe started soon after short seller Carson Block and his firm Muddy Water accused the company in June of exaggerating the size of its forestry assets. The OSC halted trading in the stock late August, and the order has remained in effect since then.
Sino-Forest was granted protection from its creditors last month, after it argued that the allegations against it had paralyzed its business. Its stock is now set to be delisted by the Toronto Stock Exchange in May.
Allen Chan, Sino’s founder and former chief executive, and David Horsley, its current chief financial officer, have both received the OSC enforcement notices, the company said. Albert Ip, Alfred Hung, George Ho and Simon Yeung, all former employees of Sino-Forest, were also singled out by the OSC.
The company and its executives, along with its underwriters and auditors, are all facing possible investor-driven class action lawsuits as well.
Reporting By Euan Rocha; Editing by Frank McGurty