UPDATE 1-OSC challenges Magna's proposed share plan

* OSC schedules hearing on Magna's proposed plan

* OSC staff says Magna plan contrary to public interest

* Magna says it will work to address the OSC's concerns

* Shares down 2.6 percent (Adds company comment, details, byline, share activity; all figures in U.S. dollars, unless noted)

By Euan Rocha

TORONTO, June 16 (Reuters) - Magna International's MGa.TO controversial plan to eliminate its dual-class share structure has run into another hurdle, with the Ontario Securities Commission challenging the proposal.

Two big pension funds have already attacked the plan, which would pay nearly $900 million to Frank Stronach, the colorful founder of the world's No. 3 auto parts maker, to cede control. [ID:nN03233248]

The OSC staff has asked the regulator to conduct a hearing on Magna's plan, saying it is "contrary to the public interest and harmful to the integrity of the Ontario capital markets."

The hearing is scheduled for June 23, with a preliminary appearance scheduled for Friday. Magna's shareholders are scheduled to vote on the plan at a special meeting on June 28.

Neither Magna's board nor its financial advisor, CIBC (CM.TO), has provided any fairness or adequacy opinion to the company's shareholders, the OSC staff said.

In response to the OSC announcement, Magna said it strongly believed that its disclosure to shareholders was complete.

"Nonetheless, we will work to address the OSC's concerns though we do not believe any additional information we might disclose will change shareholders' views," Chief Financial Officer Vincent Galifi said in a statement.

Two large proxy advisory firms have already weighed in on the proposal. RiskMetrics has advised its clients to vote in favor of the plan, while rival Glass Lewis urged shareholders to vote against it. [ID:nN1596150] [ID:nN14202250]

Magna says the plan to eliminate the dual-share structure would unlock shareholder value and boost its valuation.

The company said more than 24 percent of its shares outstanding had been voted thus far, of which more than 99 percent were in favor of the proposed transaction.

The dual-share structure has long been a sore point for investors, and Magna stock surged as much as 23 percent in May when the company announced the proposal. [ID:nSGE6450HC]

From the May 6 announcement to Tuesday's close, Magna's shares have gained 14.1 percent on the Toronto Stock Exchange. The stock fell 2.6 percent to C$71.47 in early trading on Wednesday. ($1= $1.03 Canadian) (Reporting by Euan Rocha, editing by Dave Zimmerman and Lisa Von Ahn)