CSA Publishes Final Proxy Voting and Meeting Vote Reconciliation Protocols
February 6, 2017
The Canadian Securities Administrators (CSA) recently published the final form of CSA Staff Notice 54-305 Meeting Vote Reconciliation Protocols (Final Protocols) for enhancing the procedures involved in the tabulation of proxy votes for shares held through intermediaries.
The CSA first published for comment proposed protocols (Proposed Protocols) on March 31, 2016 as part of CSA Multilateral Staff Notice 54-304 Final Report on Review of the Proxy Voting Infrastructure and Request for Comments on Proposed Meeting Vote Reconciliation Protocols (see our April 2016 Blakes Bulletin: CSA Proposes Protocols to Improve Proxy Voting Infrastructure and Voting Reconciliation Process for more information).
The Proposed Protocols are a voluntary foundation and outline the roles and responsibilities of the key entities involved in the process of tabulating proxy votes for shares held through intermediaries, as well as guidance on appropriate operational processes. The comment period ended on July 15, 2016, with the CSA receiving 10 comment letters from various market participants.
As a result of the comments received, several amendments have been made to the Proposed Protocols that are reflected in the Final Protocols.
SUMMARY OF CHANGES
- Purpose and Scope: A section has been added that encourages intermediaries to develop, maintain and apply written policies and procedures concerning client account vote reconciliation.
- Internal Safeguards: The Final Protocols have the added expectation that intermediaries devise and implement appropriate internal safeguards and controls to monitor the effectiveness of processes adopted by them to ensure that tabulators have complete and accurate vote entitlement information for each intermediary that will solicit voting instructions from beneficial owners and submit proxy votes.
- Contact Information: In addition to the expectation included in the Proposed Protocols that intermediaries and Broadridge Financial Solutions (Broadridge) will provide tabulators with current contact information, the Final Protocols include the expectation that tabulators and Canadian Depository for Securities (CDS) will provide current contact information to intermediaries and Broadridge. This is intended to assist in the timely resolution of potential over-vote issues.
- Over-vote Situations: The Final Protocols now provide direction on the steps that should be taken if intermediaries or Broadridge are contacted by a tabulator with regards to an over-vote situation. This new Protocol intends to help resolve over-vote situations in a timely manner. Furthermore, the CSA notes that this Protocol “sets out an expectation that intermediaries should establish appropriate notification methods for beneficial owner clients that wish to know if their intermediary has been unable to obtain verification that the situation has been resolved, such that the proxy votes submitted by the intermediary could potentially be pro-rated or rejected.” This addition aims to provide beneficial owners with the ability to acquire information regarding the status of their votes before the meeting.
- Requests for Information: If an intermediary requests information from a tabulator regarding whether or not proxy votes have been counted, the Final Protocols acknowledge that the tabulator can only provide the information after it has been ordered to do so by the issuer. However, they also include the recommendation that, if the issuer does not provide this instruction, the requesting party should be notified.
- Notification Period: The Proposed Protocols stated that, where an intermediary’s proxy votes are rejected or pro-rated, the issuer should instruct the tabulator to notify Broadridge within a reasonable period. The Final Protocols clarify that, as there are currently no electronic communication methods for this action, 10 business days constitutes a reasonable period. The Final Protocols also provide suggestions of the information that can be provided to satisfy this notification protocol.
While the staff notice emphasized that implementation of the Final Protocols is voluntary, CSA staff intend to monitor implementation over the next two proxy seasons, with the assistance of the technical committee (consisting of CDS, Broadridge, intermediaries and transfer agents) that has been advising on the protocols, and assess the need for any enhanced regulatory measures, such as whether aspects of the Final Protocols should be codified as legislation or whether entities that engage in meeting vote reconciliation should be designated as market participants or subject to compliance review. CSA staff also plan to observe industry initiatives for achieving end-to-end vote confirmation and paperless meeting vote reconciliation.
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