Sino-Forest gets OSC enforcement notice

Sino-Forest Corp. disclosed Monday that the Ontario Securities Commission has sent it and several of its current and past executivesenforcement notices alleging serious misconduct.

The embattled forest products company has been under the spotlight for almost a year since allegations surfaced that it misled investors by exaggerating the extent of its timber resources in China and misrepresenting its revenue. Trading in the stock has been halted since last August while the OSC investigates.

Sino-Forest said the enforcement notice it received alleges violations of two sections of the Ontario Securities Act dealing with providing false or misleading information to investors and engaging inconduct that amounts to fraud.

An enforcement notice is not a formal charge. But Sino-Forest acknowledged Monday that such notices typically "advise that [OSC] staffcontemplate commencing formal proceedings."

Enforcement notices give recipients one last chance to make their case before OSC staff decide whether to lay charges.

"The company is considering what steps it will take," a statement from Sino-Forest said.

The company has been under a cloud since last June,when short-seller Muddy Waters Research alleged that it had exaggerated sales and assets.

The firm, which has previously denied allegations of improper conduct, haslaunched a defamation lawsuit against Muddy Waters and its head, Carson Block, claiming damages of $4 billion and the recovery of profits made by Muddy Waters.

Sino-Forest applied for creditor protection last month and put itself up for sale.

Its shares are to be delisted from the TSX. Sino-Forest once had a market value of more than $6 billion.