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Canadian Securities Regulatory Monitor News and Insight

OSFI Approves the Use of Notice-and-Access by Banks and Insurance Companies

Posted in Financial Servicecs
Ana BadourPatrick BoucherFraser BourneBarry J. Ryan

Under the notice-and-access process introduced under Canadian provincial securities laws in 2013, a public corporation can deliver its management information circular and financial statements to shareholders by posting those materials on SEDAR and an alternative website. The corporation must send a form of proxy to shareholders together with a notice informing shareholders of the SEDAR and non-SEDAR websites where such materials are posted, and how a paper copy of the materials can be requested and received free of charge. The notice-and-access process therefore allows issuers to mail a thinner set of materials to shareholders, rather than the full proxy package, allowing issuers to realize significant reductions in print, handling and postage costs, and to communicate with shareholders in a more environmentally-friendly way.

The Bank Act and Insurance Companies Act, which contain their own proxy solicitation and financial statement delivery requirements, do not permit the notice-and-access delivery method. However, the Superintendent of Financial Institutions recently approved an application by two banks and an insurance company granting them an exemption from the requirement to send a prescribed management proxy circular to each shareholder whose proxy is solicited for annual and/or special meetings. The exemptions were granted on the condition that these issuers make the prescribed management proxy circular accessible, and send a notice thereof, in accordance with National Instrument 51-102 and National Instrument 54-101 adopted by Canadian securities regulators, to each shareholder whose proxy is solicited.

By deciding to grant an exemption to allow for the use of the notice-and-access process by banks and insurance companies for the delivery of a management information circular, the Office of the Superintendent of Financial Institutions seems to have adopted an approach aligned with that of Corporations Canada, which has systematically granted an equivalent exemption from the circular delivery requirement under the Canada Business Corporations Act (CBCA) on the same basis. The recent exemptions granted by the Superintendent of Financial Institutions and the exemptions granted by Corporations Canada do not permit the notice-and-access delivery method for the delivery of financial statements to shareholders.

The Bank Act is currently undergoing its mandatory review process to determine what amendments should be made to the Act, with a deadline of March 29, 2019. Hopefully, further to this review and update, the relevant provisions of the Bank Act (and corresponding provisions of the Insurance Companies Act) will also be harmonized, as is proposed under Bill C-25 and related regulations for CBCA corporations, to facilitate the use of the notice-and-access process by federally regulated entities, including in respect of the financial statement delivery requirements.