As financial markets face an unprecedented slew of challenges, Canada’s market regulators are closely monitoring events both at home and abroad, prepared to take action if necessary, they stated on Friday.

A number of regulatory actions are already underway by members of the Canadian Securities Administrators in response to recent financial industry events. This includes a temporary prohibition of the short selling of common shares of financial companies that are publicly listed in both Canada and the U.S.

In connection with this, the Investment Industry Regulatory Organization of Canada has boosted surveillance of short selling activity on Canadian marketplaces, including activity of securities that are not covered by the temporary order.

In addition, the CSA initiated a fact-finding review of money market funds and other market participants, to assess potential exposure to assets that are impaired or made illiquid.

The CSA has also begun monitoring more carefully disclosure by reporting issuers in the banking and financial services sector, while IIROC is keeping a close eye on the regulatory capital position of all dealer member firms to assess the impact of current market volatility.

With respect to asset-backed commercial paper, a special committee that was created in late 2007 will be recommending regulatory responses to aspects of the seizure of the paper.

The regulators are working closely with their counterparts in markets around the world and are actively monitoring international developments.

“The CSA is actively engaged in an examination of the issues related to the current market events and will continue to take regulatory action, where appropriate, to protect investors and market integrity in these extraordinary times,” said Jean St-Gelais, CSA chairman and president and CEO of the Autorité des marchés financiers, in a statement on Friday.