The Canadian Securities Administrators (CSA) recently provided
an update on the consultation process relating to the potential
regulation of proxy advisory firms. To date, there has been
no regulation of proxy advisory firms despite the influence that
their recommendations can have on institutional and retail
investors when exercising voting rights.
The update reveals significant differences in perspective
between issuers and institutional investors that emerged through
the comment process. Among the key comments identified in the
update are the following:
While issuers are concerned about the influence of proxy
advisory firms, institutional clients noted that proxy advisory
firms provide them with useful and cost-effective services when
exercising voting rights and are generally satisfied with the
Commenters generally agreed that the business model or
ownership of proxy advisory firms may lead to conflicts of
interest. A majority of issuers believe that conflicts of
interest are not appropriately mitigated, whereas a majority of
institutional investors believe that conflicts of interest are
properly identified, managed and disclosed.
While issuers are concerned with potential inaccuracies in
research reports, a majority of institutional investors believed
that the dialogue processes currently in place were sufficient to
avoid factual errors.
Issuers questioned the quality of the vote recommendations made
by proxy advisory firms and favoured increased transparency and
disclosure of underlying methodologies and analyses, whereas
institutional investors do not believe that additional information
would be beneficial to the market and argued against requiring
disclosure of proprietary analytical models.
Commenters generally agreed that it is important for proxy
advisors to consult with market participants when developing and
updating proxy voting guidelines, but there was no consensus about
the extent of dialogue necessary.
The views on the appropriate CSA response diverged from a
rule-based approach, including registration of proxy advisory firms
as advisors, to publishing a set of best practices. Proxy
advisory firms do not believe their activities should be
The final form of the "policy-based" approach will no
doubt attract further debate and discussion. Balancing the
interests of issuers (who are most directly affected by proxy
advisors' recommendations) with those of institutional
investors (who rely on proxy advisors' recommendations as a
cost-effective resource tool) will be a delicate and important task
for the CSA over the coming months.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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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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