The Canadian Securities Administrators (CSA) have released for
comment proposed National Policy 25-201 Guidance for Proxy
Advisory Firms (the Proposed Policy). The Proposed Policy
follows a consultation paper published by the CSA which identified
certain concerns raised about the services provided by proxy
advisory firms and their potential impact on Canadian capital
markets. There has been a similar focus in recent years on proxy
advisory firms in the United States, where the U.S. Securities and
Exchange Commission hosted a proxy advisory services roundtable in
December 2013, and in Europe.
The Proposed Policy provides guidance and recommendations to
proxy advisory firms, including the expectations of the CSA, with
respect to four areas:
Conflicts of interest
Transparency and accuracy of vote recommendations
Development of proxy voting guidelines
Communications with clients, market participants, the media and
The CSA have stated that a response was warranted based on their
consultation and analysis. Rather than impose mandatory
requirements on proxy advisory firms, they have determined that
providing guidance on recommended practices and disclosure was a
sufficient and meaningful response in light of the different
perspectives of the market participant groups and the contractual
relationship between proxy advisory firms and their clients.
The CSA also noted that concerns have been raised that proxy
advisory firms may have become de facto corporate governance
standard setters, with issuers being compelled to adopt
"one-size-fits-all" standards which may not be suitable
for an issuer's specific circumstances. The CSA reminds issuers
that, among other things, they may engage with their shareholders
to explain why they have adopted a given corporate governance
practice and discuss corporate governance and proxy voting matters
with institutional investors to address their concerns. Indeed,
issuers have obtained shareholder approval for matters that
received a negative voting recommendation from proxy advisory firms
as a result of the issuers' efforts to discuss and explain the
matters directly with shareholders.
The comment period for the Proposed Policy ends on June 23,
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
The British Columbia Court of Appeal has recently considered whether the doctrine of unconscionability can be invoked to set aside a contractual clause providing for the payment by one party to the other...
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