CSA Publishes Voluntary Meeting Vote Reconciliation Protocols

Authors: Anna Beatch, Erin Smith

On January 26, 2017, the Canadian Securities Administrators (the “CSA”) published CSA Staff Notice 54-305 (the “Protocols”).

The Protocols are designed to improve the shareholder voting process by addressing issues with the Canadian proxy voting infrastructure[1] and meeting vote reconciliation process[2].

The CSA had previously conducted a review of the proxy voting infrastructure and meeting vote reconciliation process in Canada and concluded that information gaps and communication gaps undermine the accuracy, reliability and accountability of the proxy voting infrastructure and meeting vote reconciliation process. In response to this review, the CSA published voluntary protocols in draft form as part of CSA Multilateral Staff Notice 54-304.

We discussed this review and the draft voluntary protocols in a previous blog post.

The CSA requested comments on the draft protocols in CSA Multilateral Staff Notice 54-304. Based on the comments it received, the CSA made several changes to the draft protocols.[3] For example:

  • The CSA added an expectation that intermediaries will monitor the effectiveness of the processes designed to ensure that meeting tabulators have accurate and complete vote entitlement information for each intermediary that will solicit voting instructions from beneficial shareholders and submit proxy votes.
  • The CSA added guidance regarding the steps intermediaries should take if a meeting tabulator contacts them regarding a situation where more proxy votes are cast than are entitled to be voted.
  • The CSA added an expectation that intermediaries should establish methods for notifying beneficial shareholders who wish to know if the intermediary is unable to verify that the over-vote situation has been resolved.

The Protocols lay the foundation for the key entities that implement meeting vote reconciliation, such as the central depository, intermediaries, proxy voting agents and meeting tabulators, to work collectively to improve meeting vote reconciliation. The Protocols set out the CSA’s expectations on the roles and responsibilities of these key entities. The Protocols also provide guidance on the operational processes that these key entities should implement to support accurate, reliable and accountable meeting vote reconciliation.

Specifically, the Protocols address the following four areas.

  1. The generation of accurate and complete vote entitlement information for each intermediary that will solicit voting instructions from beneficial shareholders and submit proxy votes, and the provision of same to meeting tabulators.
  2. The setting up of vote entitlement accounts for intermediaries in a consistent manner.
  3. The provision of accurate and complete proxy vote information to meeting tabulators, and the tabulation and recording of proxy votes in a consistent manner.
  4. The informing of beneficial shareholders if the proxy votes submitted to meeting tabulators in respect of their shares were rejected or pro-rated.

Importantly, the Protocols were drafted for meeting vote reconciliation for uncontested meetingsHowever, some of the CSA’s expectations and guidance are also relevant to meeting vote reconciliation for proxy contests and should be taken into account where appropriate.

At this time, the Protocols are voluntary. However, the CSA has indicated that it will monitor the implementation of the Protocols over the next two proxy seasons and assess whether enhanced regulatory measures are required.

When deciding whether to implement the Protocols, issuers should consider discussing the Protocols with legal counsel to ensure they understand their significance and implications.

[1] Shareholder voting generally occurs through proxy voting, whereby shareholders appoint someone else to attend and vote on their behalf at a meeting of shareholders. Proxy votes are typically submitted by intermediaries because most shareholders are not the registered owners of their shares; rather, they hold their shares through intermediaries, which in turn hold their shares with the central depository.

[2] Meeting vote reconciliation is the process by which proxy votes for shares held through intermediaries are tabulated.

[3] A blackline comparing the Protocols to the draft protocols is in Annex C to CSA Staff Notice 54-305.