September 28, 2011 / 6:08 PM / in 6 years

UPDATE 1-Canada regulator extends halt on Zungui shares

* OSC extends halt on Zungui Haixi shares until Nov 10

* Says Zungui auditor Ernst & Young has resigned

TORONTO, Sept 28 (Reuters) - Canada’s main securities regulator, the Ontario Securities Commission extended on Wednesday its halt on trading in shares of Chinese sportswear maker Zungui Haixi ZUN.V until Nov. 10 as it continues to probe the company’s bank statements and other matters.

Regulators halted trading in Zungui on Aug. 23, a day after the company revealed that its auditor, Ernst & Young, had halted its audit pending an investigation into inconsistencies in the company’s bank documents. Zungui’s shares are listed on the small-cap TSX Venture Exchange.

In a hearing on Wednesday, OSC officials argued before Commissioner Christopher Portner that the halt ought to be extended due to concerns about Zungui’s disclosures. Portner agreed.

The OSC noted that Zungui’s executives in China have so far refused to cooperate with its investigation. The commission has also been informed that Ernst & Young has resigned as the company’s auditor, effective Sept. 23, said Johanna Superina, who argued the matter on behalf of the OSC.

No lawyers appeared on behalf of Zungui or its executives.

Zungui announced last week that its independent directors and its chief financial officer had resigned because Chief Executive Yanda Cai was refusing to cooperate and to fund an internal investigation. [ID:nS1E78M0A9]

The company is one of a number of China-focused companies with North American listings to come under pressure recently due to reports of accounting irregularities.

“Zungui has no independent directors, no audit committee and its auditor has resigned,” said Superina, adding that the OSC has not received any communication from Cai, who controls the company’s bank accounts.

The OSC will hold another hearing on Nov. 9 to decide on whether it ought to extend the trade halt further. (Reporting by Euan Rocha; editing by Peter Galloway)

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