On January 26th, 2017, the Canadian Securities Administrators (CSA) published in final form CSA Staff Notice 54-305, Meeting Vote Reconciliation Protocols (Protocols). Meeting vote reconciliation consists of the processes used to tabulate proxy votes for shares held through intermediaries. The Protocols contain:
• CSA staff expectations on the roles and responsibilities of the key entities that implement meeting vote reconciliation (CDS; intermediaries (bank custodians and investment dealers); the primary intermediary voting agent, Broadridge, and transfer agents who act as meeting tabulators); and
• guidance on the kinds of operational processes that they should implement to support accurate, reliable and accountable meeting vote reconciliation.
CSA Staff Notice 54-305 follows on the March 31, 2016 CSA Multilateral Staff Notice 54-304 Final Report of the Proxy Voting Infrastructure and Request for Comments on Proposed Meeting Vote Reconciliation Protocols.
In the view of the CSA, given the importance of shareholder voting to the quality and integrity of Canadian capital markets, reconciliation needs to be accurate, reliable and accountable. As set out in the Protocols, accurate, reliable and accountable meeting vote reconciliation has the following characteristics:
• accurate and complete vote entitlement information for each intermediary that will solicit voting instructions from beneficial owners and submit proxy votes is provided to meeting tabulators;
• meeting tabulators set up vote entitlement accounts for each intermediary in a consistent manner;
• accurate and complete proxy vote information is provided to the meeting tabulator, and meeting tabulators tabulate and record the proxy votes in a consistent manner;
• beneficial owners know if proxy votes submitted to the meeting tabulator in respect of their shares were not accepted at a meeting and the reason why.
It is the view of CSA staff that the Protocols have been developed taking into account existing operational processes and should not require a major technological overhaul of existing systems. The CSA also acknowledges that, if the key entities can identify and implement alternative ways to achieve accurate, reliable and accountable meeting vote reconciliation, the Protocols should not be viewed as preventing them from doing so.
The Protocols are voluntary and are meant to lay the foundation for the key entities to work collectively to eliminate paper and move to electronic transmission of vote entitlement and proxy vote information, and develop end-to-end vote confirmation capability that would allow beneficial owners, if they wish, to receive confirmation that their voting instructions have been received by their intermediary and submitted as proxy votes, and that those proxy votes have been received and accepted by the tabulator.
These Protocols have been drafted with specific reference to meeting vote reconciliation for uncontested meetings. However, some of the expectations and guidance are also relevant to meeting vote reconciliation for proxy contests and should be taken into account where appropriate.
The CSA intends to monitor industry initiatives in these areas. While acknowledging that the Protocols do not address client account vote reconciliation, the CSA encourages intermediaries to establish, maintain and apply written policies and procedures that specify:
• how they determine which beneficial owner clients have voting entitlements for a particular meeting (including how this information is communicated to beneficial owner clients);
• how they reconcile voting entitlements to their positions with CDS, DTC or other intermediaries, and
• appropriate internal safeguards and controls to monitor the effectiveness of those processes.
Please refer to Appendix A: Meeting Vote Reconciliation Flowchart which outlines at a high-level the information flows for meeting vote reconciliation assuming the processes outlined in the Protocols are implemented.
CSA Staff Notice 54-305 is available for download from the websites of the participating jurisdictions.
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 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.