The Canadian Securities Administrators (CSA) have recently released finalized guidance and protocols for meeting vote reconciliation under CSA Staff-Notice 54-305 Meeting Vote Reconciliation Protocols (the Protocols) which are implemented on a voluntary basis. The Protocols mark the latest step in a systemic review that began in 2013 to bring greater transparency and simplicity in vote tabulation specifically for shares held through intermediaries.
As discussed in our previous update, the Protocols are primarily intended to address the issue that all votes of beneficial holders are properly tabulated to ensure that true beneficial holders can exercise their right to direct the voting of beneficially owned securities. As such, the Protocols delineate the responsibilities for those parties responsible for vote collection and tabulation at each stage of the process and clearly outline the operational processes that each party should implement (which includes specific guidance on particular scenarios). These parties include the Canadian Depository Securities, intermediaries (such as bank custodians and investment dealers), primary intermediary voting agents (such as Broadridge Investor Communication Solutions Inc.), and transfer agents that act as meeting tabulators. Additionally, the Protocols lay the foundation for paperless meeting vote reconciliation and end-to-end vote confirmation initiatives (that will allow beneficial owners to confirm whether their voting instructions have been received and followed).
Each of the parties' respective responsibilities and operational processes are discussed under four separate objectives/stages that the CSA believes will ensure accurate, reliable and accountable meeting vote reconciliation:
- providing meeting tabulators with accurate and complete vote entitlement information for each intermediary that will solicit voting instructions from beneficial owners and submit proxy votes;
- meeting tabulators setting up vote entitlement accounts for each intermediary in a consistent manner;
- sending accurate and complete proxy vote information to the meeting tabulator, and meeting tabulators tabulating and recording the proxy votes in a consistent manner; and
- informing beneficial owners as to whether proxy votes submitted to the meeting tabulator in respect of their shares were not accepted at a meeting (along with an explanation).
Although the Protocols represent a welcome initiative aimed at clarifying the proxy voting process, the extent to which market participants will actively coordinate their efforts in respecting the CSA's direction ultimately remains to be seen. To this end, the CSA has established a technical committee in order to assist in monitoring the implementation of the protocols over the course of the next two proxy seasons and in its ultimate determination as to whether enhanced regulatory measures are necessary.
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The authors would like to thank Brian Peebles, Articling Student, for his assistance in preparing this legal update.
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