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A Sino-Panel factory is seen in Gaoyao, Southern China on June 28, 2011.

Adam Dean/The Globe and Mail

Failed forestry company Sino-Forest Corp. and several former executives "engaged in deceitful or dishonest conduct" in connection with the company's timber assets and revenue that "they knew constituted fraud" and violated securities law, the Ontario Securities Commission ruled Friday.

These executives include former chairman and chief executive Allen Chan as well as Albert Ip, Alfred C.T. Hung and George Ho. The commission dismissed the fraud allegation against Simon Yeung. In its decision, however, the OSC said all five of the former executives had misled investigators.

The ruling capped what had become the longest hearing ever held by the commission. The Sino-Forest story, however, is far from over for the investors who lost billions in the company after its 2011 collapse. A followup hearing to determine appropriate sanctions won't take place for at least a month. Even then, it is not yet clear how the sanctions will be effectively enforced upon former executives halfway around the world – or how long it will take money that regulators dredge up to finally reach investors.

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From our archives: The roots of the Sino-Forest mystery

The OSC is a signatory to a global, cross-border memorandum of understanding of securities regulators – one that includes the Securities and Futures Commission in Hong Kong, where Sino-Forest's executive office was based, and the China Securities Regulatory Commission. The Ontario regulator's website, however, says that "the recovery of monetary sanctions in many proceedings is limited because respondents may have no assets or limited assets, may no longer reside in Ontario, or cannot be found."

A spokesperson for the provincial regulator declined to comment on the effectiveness of global sanction enforcement, but called the decision "an important milestone in a complex, multijurisdictional case." York University law professor and corporate governance expert Richard Leblanc warns that, at best, this decision over the once-$6-billion company will still leave investors in a holding pattern.

"It's very difficult to collect from someone who is outside of Canada," he said. Being a signatory to the International Organization of Securities Commission's Memorandum of Understanding, however, should significantly help the OSC to enforce its sanctions, he said. But it'll take time.

"You're now six years out – this could take another two, three, four years for investors to be compensated for their loss," Prof. Leblanc said. He called the case an egregious example of a too-slow provincial regulator: "It was clearly a fraud; the regulators should have been more expeditious and should have acted earlier."

Anita Anand, a specialist in investor protection at the University of Toronto's law school, said the ruling still represented a win. "It is not too late for the key message to be delivered: Fraudulent conduct will not be tolerated in Ontario's capital markets," she said.

Friday's decision was nearly 300 pages long. The hearing began in September, 2014, took nearly 200 days and produced 20,000 pages of transcripts and 2,000 exhibits. The commission's investigation concerned conduct from 2006 to 2012 that suggests the company and several executives, among other allegations, "engaged in deceitful and dishonest courses of conduct that ultimately caused the assets and revenue derived from the purchase and sale of standing timber, Sino-Forest's main business, to be fraudulently overstated."

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Emily Cole of Miller Thomson LLP, who represented Mr. Chan, said her client was "very disappointed with the result," but declined to comment further. Lawyers from McMillan LLP representing Mr. Ip, Mr. Hung, Mr. Ho and Mr. Yeung declined to comment Friday as they were reviewing the decision.

During the hearings, Ms. Cole suggested that Mr. Chan's business practices may have appeared unusual because of differences in practice between China and Canada. But in its decision, the OSC suggested this argument insufficiently applied to the company, which was listed on the Toronto Stock Exchange and prepared statements according to generally accepted accounting principles in Canada.

The decision also found that while executives were entitled to rely on colleagues with greater Canadian financial-disclosure expertise, such reliance requires communicating details accurately and completely, which the executives "did not do." It ruled, too, that Mr. Chan improperly concealed an interest in a company Sino-Forest bought a stake in.

Sanctions will be determined at a later hearing, the date of which will be confirmed within 30 days. The OSC's sanction powers include bans against trading or becoming a director or officer of a public company, and monetary sanctions of up to $1-million for each violation of securities law, plus the cost of the investigation.

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