The Canadian Securities Administrators (CSA)
published for comment a policy governing the activities of proxy
advisory firms which provide voting advisory and corporate
governance consulting services to institutional investors. National
Policy 25-201 Guidance for Proxy Advisory Firms is
primarily oriented to address concerns expressed relating to (i)
potential conflicts of interest, and (ii) the transparency and
accuracy of voting recommendations and proxy voting guidelines
developed by proxy advisory firms. The comment period on the
proposed policy ends June 23, 2014.
The proposed policy is consistent with the themes outlined in,
and is responsive to feedback received from market participants in
response to, the CSA's June, 2012 Consultation Paper 25-401
Potential Regulation of Proxy Advisory
The CSA has proposed a policy-based approach, consisting of
guidance for proxy advisory firms on recommended practices. This is
consistent with other initiatives in the U.S. and Europe. The
guidance contained in the proposed policy can be summarized as
Conflicts of Interest. Proxy advisory firms would be
expected to identify, manage and mitigate actual or potential
conflicts of interest by establishing policies and procedures,
internal safeguards and a code of conduct.
Transparency and Accuracy of Vote Recommendations. To
enhance disclosure of the processes leading to voting
recommendations, proxy advisory firms would be expected to
implement appropriate practices to promote transparency and
accuracy of voting recommendations by disclosing, where
appropriate, policies and procedures and describing the
methodologies used to develop voting recommendations.
Development of Proxy Voting Guidelines. Proxy advisory
firms would be encouraged to engage with their clients, market
participants and the public by disclosing, where appropriate, the
policies and procedures describing the process followed in
developing proxy voting guidelines.
Communications with Clients, Market Participants, the Media
and the Public. Proxy advisory firms would be expected to
publicly disclose their approach to any dialogue or contact with
issuers and to disclose, where appropriate, their policies and
procedures governing their communications with clients, market
participants, the media and the public.
Corporate Governance Practices. In response to concerns
that proxy advisory firms are significantly influential in
compelling issuers to adopt particular corporate governance
standards, proxy advisory firms would be encouraged to consult with
The CSA state that the proposed policy would promote
transparency in the development of proxy voting guidelines and in
the activities of proxy advisory firms.
Please contact any member of our Corporate Securities Group to
discuss the implications of these proposed changes.
1 Refer to our September 20, 2013 Client Update,
"Canadian Securities Administrators to Regulate Proxy Advisory
Firms" for a discussion of the Consultation Paper.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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