The Ontario Securities Commission (OSC) has permanently banned China-based Zungui Haixi Corp., and its two top executives from the capital markets for disclosure and governance failures.

An OSC panel said on Wednesday that it has permanently banned Zungui Haixi, which came to market in a $39.8-million initial public offering in 2009, along with its CEO, Yanda Cai, and chairman, Fengyi Cai, for various breaches of Ontario securities law.

Back in February, the commission found that Zungui has failed to maintain an audit committee since September 22, 2011; failed to file its audited annual financial statements on time; and, failed to produce documents demanded by OSC staff. Additionally, it said that the Cais permitted the company’s violations; that they failed to co-operate with the firm’s audit committee in addressing a former auditor’s concerns, and obstructed an independent investigation of those concerns; ignored the regulator’s request for documents; and, that Yanda Cai violated the public interest by imposing limits on its auditor.

On Wednesday, in its decision on sanctions and costs, the OSC panel noted that, “Within two years of the completion of its initial public offering, Zungui simply ceased to comply with the audit committee and financial statement obligations under Ontario securities law, and left its investors in an untenable position.”

It also said the fact that the company and its executives aren’t located in Ontario, “raises serious issues from the perspective of regulatory compliance and enforcement.” Indeed, earlier this year, the OSC indicated that a review into emerging market issuers found a host of concerns with the disclosure, governance, listing and auditing of companies that are largely based overseas, but are listed on Canadian markets. That review proposed a series of recommendations for issuers, underwriters, and auditors aimed at improving compliance.

In this case, the panel found that, “the respondents have demonstrated a total and continuing disregard for their obligations under Ontario Securities law” and “have demonstrated from their conduct that they are fundamentally ungovernable.”

As a result, it decided to permanently ban them from the capital markets, including permanently prohibiting the Cais from serving as directors or officers of any issuer or registrant, banning them from registration, and prohibiting trading in any securities of Zungui. In addition, it ordered that the Cais pay $63,667 in costs to the commission.