The Canadian Securities Administrators (CSA) have announced that
they are adopting a policy providing guidance to proxy advisory
firms, which have an influential role in public securityholder
voting contexts. National Policy 25-201 Guidance for Proxy
Advisory Firms (NP 25-201) provides guidance on recommended
practices and disclosure for proxy advisory firms, in order to: (i)
promote transparency in the processes leading to vote
recommendations and the development of proxy voting guidelines; and
(ii) foster understanding among market participants about the
activities of proxy advisory firms.
On June 21, 2012, the CSA published for comment a consultation
paper1 to initiate discussion regarding market
participant concerns about proxy advisory firm services and the
potential impact on Canadian capital markets. The CSA concluded,
from comments received during the consultation and recommendations
arising from international initiatives, that it was appropriate to
provide guidance, and published a draft policy for comment on April
Comments and Subsequent Review
The Draft Policy elicited 58 comment letters from various market
participants. The key changes to the Draft Policy, adopted in
response to the comments received and reflected in NP 25-201, are
Interest. To enhance corporate
governance practices, the board of directors or executive
management team of a proxy advisory firm are generally expected to
oversee the development of policies and procedures and codes of
conduct, the implementation of internal safeguards and controls and
the effectiveness of those measures instituted to address actual or
potential conflicts of interest. It is also recommended that proxy
advisory firms provide sufficient information to enable their
clients to assess the independence and objectivity of the proxy
advisory firms and their services.
Transparency and accuracy
of vote recommendations. It is
recommended that proxy advisory firms generally describe on their
websites the practices adopted with respect to the hiring, training
and retaining of individuals to demonstrate that they have the
appropriate experience, competencies, skills and knowledge to
prepare vote recommendations.
Development of proxy
voting guidelines. It is recommended
that proxy advisory firms consider account relevant characteristics
of the issuers when developing proxy voting guidelines. Such
characteristics may include the size, industry and governance
structure of an issuer.
clients, market participants, other stakeholders, the media and the
public. It is recommended that proxy
advisory firms communicate in reports to their clients how the
relevant approaches or methodologies were applied and the sources
of information they used in preparing vote recommendations.
The CSA recognize that proxy advisory firms have demonstrated a
willingness to respond to the concerns raised by market
participants and support the initiatives taken by many firms to
improve their practices. The CSA intend to continue to monitor
market developments in the proxy advisory industry and other
international initiatives to evaluate if NP 25-201 addresses the
Canadian marketplace's concerns.
1. CSA Consultation Paper 25-401 Potential Regulation
of Proxy Advisory Firms.
2. National Policy 25-201 Guidance for Proxy Advisory
Firms (the Draft Policy). For more information on the Draft
Policy see our April 25, 2014 Update, Canadian Securities
Administrators Publish Proposed National Policy to Regulate Proxy
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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