The Canadian Securities Administrators (the CSA) have announced
that, after reviewing the comments received on Consultation Paper
25-401 Potential Regulation of Proxy Advisory Firms, they have
concluded that they should address the concerns raised about
services provided by proxy advisory firms.
In June 2012, the CSA published for comment Consultation Paper
25-401 Potential Regulation of Proxy Advisory Firms. The purpose of
the consultation was to provide a forum for discussion of concerns
raised about the services provided by proxy advisory firms and the
potential impact on Canadian capital markets and to determine if,
and how, these concerns should be addressed by the CSA. For
details, please access our June 2012 Blakes Bulletin
here. Proxy advisory firms review and analyze matters which
will be the subject of a vote at shareholders meetings and make
voting recommendations on such matters to their clients, which are
usually institutional investors. The Consultation Paper indicated
that proxy advisory services in Canada are dominated by two firms,
being Institutional Shareholders Services Inc. and Glass, Lewis
As a result of such consultation, the CSA have announced in CSA
Notice 25-301 Update on CSA Consultation Paper 25-401 dated
September 19, 2013, that, in their view, a policy-based approach
that would provide guidance on recommended practices and disclosure
for proxy advisory firms will promote transparency and
understanding of the services provided and is an appropriate
response under the circumstances.
The CSA disclosed that over 60 comment letters were received
from various market participants. The CSA Notice stated that most
issuers agreed with each of the concerns regarding proxy advisory
firms identified in the Consultation Paper, being potential
conflicts of interest, perceived lack of transparency, potential
inaccuracies and limited dialogue between proxy advisory firms and
issuers, potential governance implications and the extent of
reliance by institutional investors on the recommendations provided
by proxy advisory firms.
On the other hand, the CSA stated that institutional investors
noted that proxy advisory firms provided useful and cost-effective
services when exercising their voting rights. The CSA noted that
institutional investors were generally satisfied with the services
provided by proxy advisory firms.
Views of the commenters on the appropriate CSA approach
differed. Some institutional investors suggested a CSA response was
not warranted. Some commenters suggested a rules-based approach and
others suggested the CSA adopt a recommended set of best
As noted, the CSA concluded that a policy-based approach is an
appropriate response in the circumstances and that they intend to
publish for comment their proposed approach in the first quarter of
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