Canadian Securities Laws

Proposed CSA Proxy Voting Protocols, May 29, 2016

On March 31, 2016, the Canadian Securities Administrators (CSA) published for comment 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 (CSA 54-304).  CSA 54-304 proposes voluntary protocols containing CSA staff expectations and guidance for improving the processes involved in the tabulation of proxy votes. The comment period closes on July 15, 2016.


The CSA has deemed shareholder voting as one of the most important means by which shareholders can affect an issuer’s governance and fundamental to the quality and integrity of the capital markets.  Because most shares in Canada are voted through proxy voting, the CSA is committed to “increasing the accuracy, the accountability, and the reliability of the proxy voting infrastructure.”

For some time, issuers and investors have expressed concerns that the proxy voting infrastructure and meeting vote reconciliation are inaccurate, unreliable and non-transparent. They pointed to two specific problems as evidence:

  • Over-voting: Over-voting occurs when an intermediary submits proxy votes and the meeting tabulator cannot establish that the intermediary has any vote entitlements or the number of proxy votes submitted exceeds the number of vote entitlements for that intermediary as calculated by the tabulator.
  • Missing votes: Beneficial owners generally have no way of knowing whether a tabulator or meeting chair accepted their intermediary’s proxy votes. Investors have identified instances where the voting results suggested their proxy votes were not included in the tabulation and therefore went “missing.”

Following extensive research and consultation, including reviews of shareholder meetings, CSA staff identified two significant information and communication gaps in the processes used to tabulate proxy votes submitted by intermediaries on behalf of their beneficial owner clients (known as meeting vote reconciliation):

  • Information gaps: Meeting tabulators do not always have the accurate and complete vote entitlement information they require to properly establish which intermediaries have vote entitlements for a meeting and how many vote entitlements these intermediaries have. Missing, incomplete or inaccurate vote entitlement information can cause an intermediary that submits proxy votes to be in an over-vote position from the meeting tabulator’s perspective. Meeting tabulators use different methods to address over-vote situations. Depending on the tabulator, the same proxy votes could be accepted, rejected or pro-rated. Rejected or pro-rated votes could result in the appearance of missing votes.
  • Communication gaps: There are no standard communication channels between intermediaries and tabulators. The lack of such communication channels means there is no way to efficiently and accurately:
    • confirm that all necessary information has been sent and received, or;
    • detect and resolve information problems that could lead to proxy votes being rejected or pro-rated at a meeting.

Furthermore, intermediaries are not routinely notified if a meeting tabulator rejects or pro-rates their proxy votes due to missing or incomplete vote entitlement information.

In response, CSA staff developed the proposed protocols to address these gaps. The protocols outline roles and responsibilities and provide detailed guidance on operational processes for the key entities in the proxy voting process  including intermediaries, tabulators and Broadridge Fiancial Solutions as well as issuers, that implement meeting vote reconciliation. For more details please see CSA 54-304.

The CSA’s goal is to finalize and publish the protocols in time for the 2017 proxy season.  For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX Securities Law does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.