The Canadian Securities Administrators (CSA) have issued CSA
Consultation Paper 54-401 (the Consultation Paper) to seek input
from stakeholders on Canadian proxy voting infrastructure. In
particular, the CSA has identified two issues for further
(1) whether accurate vote reconciliation is occurring within the
proxy voting infrastructure, and
(2) determining the type of end-to-end vote confirmation system
that should be added to the proxy voting infrastructure.
The Consultation Paper provides a comprehensive overview of the
network of organizations, systems, legal rules and market practices
that support the solicitation, collection, submission and
tabulation of proxy votes for shareholder meetings which comprise
the current Canadian proxy voting infrastructure. The Consultation
Paper also describes a number of concerns that have been identified
with the current system and notes that issuers and investors have
expressed a lack of confidence in the reliability of the proxy
While the CSA acknowledges that other areas of concern have been
raised by market participants, it has identified that the following
factors contribute to the complexity of proxy voting and to the
creation of reconciliation challenges:
(1) the multiple layers of rights to securities associated with
the intermediated system of holding securities;
(2) the practice of securities lending;
(3) the use of voting agents by investors, typically in
connection with accounts managed by professional investment
(4) the right of objecting beneficial owners,1 which
make up an increasing number and already more than half of
beneficial owner accounts in Canada, not to disclose their
identities to issuers and others.
The CSA notes that accurate proxy voting "is integral to
the legitimacy of shareholder voting and fosters confidence in our
capital markets". While the CSA emphasizes that it is has not
come to a conclusion as to whether any further securities
regulation is warranted in these areas, stakeholders will be
interested in the issues which the CSA has raised in its
Consultation Paper and what regulatory response, if any, the CSA is
likely to put forward to address these issues. While no reforms
have been proposed at this time, the CSA has noted that it
considers that more active regulatory oversight of the proxy voting
infrastructure would be appropriate.
Over the last several years, publicly traded companies in Canada
have been faced with a historic number of proxy fights, many of
which were high profile. Accordingly, boards of directors and
management of publicly traded companies in Canada have not only
become more inclined to listen to advisers in seeking appropriate
defences to shareholder activism but also to ensure that every
proxy vote is properly accounted for. We do not expect that the
trend of increased shareholder activism and proxy fights will abate
in the ensuing years and for that reason the rules governing the
proxy voting process will become increasingly important to market
For the above reasons we believe that the CSA's review of
the proxy voting infrastructure is timely and we welcome the review
process. We encourage interested market participants to review the
Consultation Paper and contact the CSA with comments on the proxy
The comment period for the Consultation Paper is open until
November 13, 2013.
1 An objecting beneficial owner is a beneficial owner of
shares in the intermediated holding system who objects to the
intermediary disclosing his/her/its name, contact information and
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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