In June 2012, the Canadian Securities Administrators (CSA)
sought comments from market participants on Consultation Paper
25-401 Potential Regulation of Proxy Advisory Firms
(Consultation Paper). The CSA has provided an update on the
comments it has received on the Consultation Paper.
Of concern to the CSA is the integrity of the proxy voting
system, in particular its transparency, accuracy and the potential
for conflicts of interest.
The comments received show that opinions are generally divided
between two camps: issuers, issuer related associations and law
firms in one camp, and institutional investors and related
associations in the other.
Issuers were of the opinion that while proxy advisory firms are
important, they expressed concern over the influence such firms may
have on the voting patterns of institutional investors; whereas
institutional investors saw proxy advisory firms as useful and cost
effective and the institutional investors noted that they did not
always follow the recommendations of the proxy advisory firms.
Issuers raised concerns about the lack of transparency of
underlying methodologies and analyses which brings into question
the quality of vote recommendations, suggesting that more
transparency and disclosure is necessary. Institutional investors
saw no benefit to such additional disclosure. In addition, issuers
were concerned about the limited dialogue between themselves and
proxy advisory firms, which could lead to inaccuracies in research
Most commenters agreed that the ownership structure and business
model of the proxy advisory firms could lead to conflicts of
interest. Opinions diverged on whether such conflicts are properly
mitigated. Also, most agreed that proxy advisory firms should
consult with market participants when updating voting
Predictably, proxy advisory firms have stated that they have
appropriate policies in place to address the concerns raised and
that their industry does not need to be regulated.
The CSA can take one of three approaches regarding proxy
advisory firms: keep the status quo and do nothing, implement a
policy-based system of best practices, or take a rules-based
approach and implement regulations (which may include the
registration of proxy advisory firms). Based on the comments
received, the CSA had concluded that a policy-based approached is
the appropriate response and is in the process of developing this
approach and publishing it for comment in the first quarter of
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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