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Canadian Securities Regulatory Monitor

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CSA’s 2016 Enforcement Report: insights into securities regulatory activity

Posted in AMF, CSA, Enforcement, Litigation, OSC
Shane C. D'SouzaRene SorellCristian Blidariu

The Canadian Securities Administrators (CSA) recently released its annual report on the enforcement activities of its members. The CSA is an umbrella group of Canada’s securities regulators.

Summary of 2016 Results[1]

Generally, enforcement and pre-enforcement activity, and monetary sanctions imposed by regulators decreased compared to 2015 but were higher than they were in 2014.

2016 2015 2014
Monetary Sanctions $62,148,866 $138,298,796 $58,239,156
 
Restitution, Compensation and Disgorgement $349,654,379 $111,651,429 $65,717,760
 
Commenced Cases (by notice of hearing, statement of allegations, or sworn Information) 56 108 105
 
Individual Respondents 72 165 189
 
Company Respondents 72 101 92
 
Most prevalent violations Illegal Distributions
Fraud
Illegal Distributions
Fraud
Illegal Distributions
Fraud
 
Concluded Cases (by final decision or a settlement) 109 145 105
 
Individual Respondents 168 253 149
 
Company Respondents 94 117 106
 
Most prevalent violations Illegal Distributions
Fraud
Illegal Distributions
Fraud
Illegal Distributions
Fraud
 
Preventative Measures (Asset Freeze Orders) 45 52 35
 
Reciprocal Orders 63 96 58

 

Increase in cases concluded by SROs

Despite the decrease is cases concluded by CSA members, the three key self-regulatory organizations (Investment Industry Regulatory Organization of Canada, the Chambre de la sécurité financière and the Mutual Fund Dealers Association of Canada) concluded more cases in 2016 than in previous years (2016: 159; 2015: 139; 2014: 112).

Collaborative measures

The CSA report highlighted measures that had been implemented in the last year to increase collaboration between its members and boost their inter-jurisdictional reach, including:

  • CSA members were making increased efforts to collaborate closely with Canadian law enforcement agencies.
  • The Alberta Securities Commission (ASC) and RCMP announced a Joint Serious offences Team, following similar initiatives in Ontario and Quebec.
  • Amendments to the securities legislation in Quebec, Nova Scotia and New Brunswick now provide for automatic effect in those provinces of new orders and settlement agreements made by other CSA members. In 2015, Alberta made a similar change to its securities legislation. As a result, any order imposing sanctions, conditions, restrictions or requirements issued by another CSA regulator or securities administrative tribunal based on a finding or admission of a contravention of securities legislation is now automatically reciprocated in Alberta, New Brunswick, Nova Scotia and Québec.

Impact of OSC’s No-Contest Settlement Program

The OSC’s recently implemented no-contest settlements program resulted in approximately $320 million being returned to investors in 2016 from 4 settlements — almost three times the amounts that were returned to investors for various offences in 2015 in all CSA member jurisdictions.

Comments on success of whistleblower programs

The CSA reported that the whistleblower programs implemented by the OSC and the AMF “have already shown signs of early success” and had “attracted several credible tips.” The ASC recently announced that it is considering implementing a whistleblower program to encourage tipsters to expose wrongdoing in the province’s capital markets. Unlike the OSC’s program, but like the AMF’s, the ASC is not considering rewarding whistleblowers financially.

 

[1] The numbers in this table and in this article have been taken from the CSA’s 2016 Enforcement Report, which can be found at http://www.csasanctions.ca/CSA_AnnualReport2016_English_Final.pdf

Initiatives des Autorités canadiennes en valeurs mobilières sur les Fintech : bac à sable réglementaire et coopération

Posted in CSA, OSC
Charles MorganLaure Fouin

Le 23 février 2017, les Autorités canadiennes en valeurs mobilières (ACVM) ont annoncé le lancement d’un bac à sable réglementaire. L’objectif du bac à sable réglementaire est d’appuyer les Fintech en leur permettant de faire une demande à l’organisme de réglementation compétent afin de bénéficier d’une approche plus adaptée en matière de réglementation. Cette approche doit faciliter l’utilisation d’applications, de produits et de services novateurs chez les entreprises au Canada, tout en protégeant adéquatement les investisseurs.

Par conséquent, les ACVM évalueront au cas par cas le bien-fondé de chaque modèle et autoriseront les entreprises innovantes à s’inscrire, ou leur accorderont des dispenses de certaines obligations, pour qu’elles puissent tester leurs produits et services sur l’ensemble du marché canadien.

Parmi les modèles d’entreprise admissibles au bac à sable réglementaire des ACVM, on compte : Continue Reading

Canadian Securities Administrators Fintech Initiatives: Regulatory Sandbox and Co-Operation

Posted in CSA, OSC
Ana BadourLaure Fouin

On February 23, 2017, the Canadian Securities Administrators (CSA) announced the launch of a regulatory sandbox. A regulatory sandbox aims at supporting Fintech businesses by allowing them to apply to the regulator to benefit from a more tailored approach to regulation that balances the need to facilitate the use of innovative products, services and applications all across Canada with appropriate investor protection.

As a result, the CSA will assess the merits of each business model, on a case-by-case basis, and allow innovative businesses to register or grant them relief from certain requirements to permit them to test their products and services throughout the Canadian market.

Examples of potential business models eligible to the CSA regulatory sandbox are: Continue Reading

Modifications proposées au Règlement sur les instruments dérivés du Québec

Posted in AMF
Laure FouinSonia StruthersKonstantin Sobolevski

Le 1er février 2017, l’Autorité des marchés financiers (AMF) a publié pour consultation des modifications proposées (Modifications proposées) au Règlement sur les instruments dérivés du Québec.

Les Modifications proposées portent sur trois questions : l’exigence de transmettre des informations relativement aux opérateurs en couverture, l’interdiction d’offrir des options binaires aux personnes physiques et l’obligation pour les personnes agrées de présenter leurs états financiers.

Exigence de transmettre des informations relativement aux opérateurs en couverture

La Loi sur les instruments dérivés du Québec prévoit une exemption de presque toutes ses exigences lorsque des contreparties qualifiées participent à des activités ou à des opérations sur dérivés de gré à gré. Selon la Loi, les contreparties qualifiées comprennent, en général, non seulement les investisseurs institutionnels, comme les caisses de retraite et les institutions financières, mais aussi les sociétés détenant un actif net minimal de plus de 10 M$ et les personnes physiques détenant un actif net minimal de plus de 5 M$ qui répondent à d’autres conditions prescrites. La Loi précise qu’un opérateur en couverture[1] est aussi une contrepartie qualifiée, mais la définition est fondée sur la nature de ses activités.

Les Modifications proposées imposent l’obligation de transmettre des informations lorsqu’une contrepartie qualifiée réalise une opération sur dérivés de gré à gré avec un opérateur en couverture qui ne se qualifie pas comme contrepartie qualifiée selon un autre volet de la définition de contrepartie qualifiée fournie dans la Loi. Au lieu de l’attestation initialement proposée par l’AMF en janvier 2016, les Modifications proposées obligent la contrepartie qualifiée à transmettre à l’AMF, tous les trimestres (dans les 30 jours suivant la fin du trimestre au cours duquel l’opération a été réalisée), les informations suivantes :

  • les identifiants pour les entités juridiques attribués à la contrepartie qualifiée et à l’opérateur en couverture;
  • si l’opérateur en couverture n’est pas admissible à l’attribution d’un identifiant pour les entités juridiques, le nom et l’adresse de l’opérateur en couverture ainsi que l’identifiant utilisé par la contrepartie qualifiée afin d’identifier l’opérateur en couverture;
  • l’identifiant unique d’opération attribué à l’opération par le référentiel central.

Prohibition des options binaires

Les Modifications proposées interdisent l’offre d’options binaires aux personnes physiques, sauf si elle est expressément autorisée par l’AMF. L’AMF énonce dans l’avis accompagnant les Modifications proposées que cette interdiction est justifiée en raison du nombre croissant de plaintes reçues relatives à la négociation des options binaires, qui sont offertes illégalement à une clientèle québécoise de détail par l’entremise de plateformes de négociation en ligne non autorisées. Ces options, aussi appelées options « tout ou rien », ont une échéance très courte (inférieure à 30 jours) et donnent droit au titulaire à un rendement fixe ou à un rendement nul, selon que le sous-jacent satisfait ou non à une condition prédéterminée, sans que le titulaire ait la possibilité d’acquérir ou de vendre le sous-jacent.

Obligation de présentation des états financiers pour les personnes agréées

Les personnes agréées, c’est-à-dire les personnes qui créent ou mettent en marché des dérivés, mais qui ne sont pas des entités réglementées[2] reconnues par l’AMF, doivent transmettre annuellement leurs états financiers à l’AMF. Les Modifications proposées assoupliraient l’exigence de conformité aux PCGR canadiens applicables aux sociétés ouvertes et autoriseraient la préparation de ces états financiers conformément à différents principes comptables généralement reconnus au Canada ou dans un territoire étranger, notamment les IFRS et les PCGR américains.

Les commentaires sur les Modifications proposées seront acceptés jusqu’au 4 mars 2017.


[1] En vertu de la Loi, un « opérateur en couverture » est « une personne qui, compte tenu de son activité : a) est exposée à un ou plusieurs risques se rapportant à cette activité, dont des risques d’approvisionnement, de crédit, de change, environnementaux ou de fluctuation de prix d’un sous-jacent; b)recherche la couverture d’un tel risque en réalisant une opération ou une série d’opérations sur dérivés dont le sous-jacent est celui qui est directement associé à ce risque, ou un autre sous-jacent qui lui est apparenté ».

[2] En vertu de la Loi, une « entité réglementée » est définie comme « une bourse, un système de négociation parallèle qui n’est pas inscrit à titre de courtier, ou un autre marché organisé, une chambre de compensation, un système de règlement, un fournisseur de services d’appariement, une agence de traitement de l’information, un référentiel central, un organisme d’autoréglementation et toute personne que l’[AMF] désigne […] comme entité réglementée, lorsqu’elle considère que cela est nécessaire au bon fonctionnement du marché ».

Proposed Amendments to Quebec Derivatives Regulation

Posted in AMF
Laure FouinSonia StruthersKonstantin Sobolevski

The Autorité des marchés financiers (AMF) published for comments on February 1, 2017 proposed amendments (Proposed Amendments) to the Derivatives Regulation (Québec) (“QDR”).

The Proposed Amendments address three matters: filing requirements when dealing with hedgers, prohibiting the offering of binary options to individuals, and reporting obligations of qualified persons.

Filing Requirements When Dealing With Hedgers

The Quebec Derivatives Act (“QDA”) provides an exemption from almost all of its requirements when accredited counterparties engage in activities or transactions in over-the-counter (“OTC”) derivatives. Accredited counterparties as defined in the QDA are in general institutional investors such as pension funds and financial institutions but also include companies holding minimum net assets of more than $10 million and individuals holding minimum net assets of more than $5 million and meet other prescribed conditions. A hedger as defined in the QDA is also an accredited counterparty but the definition is based on the nature of the person’s activities.

The Proposed Amendment imposes filing requirements when an accredited counterparty engaging in an OTC derivatives transaction with a hedger[1] who does not qualify as an accredited counterparty under another branch of the definition of an accredited counterparty in the QDA. In lieu of the certification requirement initially proposed by the AMF in January 2016, the Proposed Amendments require that accredited counterparties engaging in OTC transactions with such hedgers would have to send to the AMF, on a quarterly basis (within 30 days after the end of the quarter in which the transaction occurred), the following information:

  • legal entity identifiers of the accredited counterparty and the hedger;
  • if the hedger is not eligible to receive a legal entity identifier, the hedger’s name, address, and the identifier used by the accredited counterparty to identify such hedger; and
  • the unique transaction identifier assigned by the trade repository to the transaction.

Prohibition of Binary Options

The Proposed Amendments unless the offering is expressly authorized by the AMF prohibit offering binary options to individuals. The AMF states in the notice accompanying the Proposed Amendments that it is proposing such a prohibition because of the growing number of complaints received regarding the trading of binary options which are offered illegally to retain customers in Quebec via unauthorized on-line trading platforms. Such options, also called “all or nothing” options have a very short term (less than 30 days) and entitle the holder to receive either a fixed yield or a zero yield, depending on the underlying interest’s meeting a predetermined condition, without entitling the holder to buy or sell the underlying interest.

Reporting Obligations of Qualified Persons

Qualified persons, that is, persons who create or market derivatives but which are not regulated entities[2] recognized by the AMF, have to deliver their financial statements to the AMF on an annual basis. The Proposed Amendments would relax the requirement that such financial statements be prepared in accordance with Canadian GAAP applicable to public companies and would allow preparing such statements in accordance with different accounting principles generally accepted in Canada or in a foreign jurisdiction, including IFRS and US GAAP.

Comments on the Proposed Amendments are welcome until March 4, 2017.


[1] Under the QDA, a “hedger” is “a person who, because of the person’s activities, (a) is exposed to one or more risks attendant upon those activities, including supply, credit, exchange and environmental risks and the risk related to fluctuations in the price of an underlying interest; and (b)seeks to hedge that risk by engaging in a derivatives transaction, or a series of derivatives transactions, where the underlying interest is the underlying interest directly associated with that risk or a related underlying interest”.

[2] Under the QDA, a “regulated entity” is defined as “an exchange, an alternative trading system not registered as a dealer, or another published market, a clearing house, a settlement system, a matching service utility, an information processor, a trade repository, a self-regulatory organization or any person the [AMF], where it considers it necessary for the proper operation of the market, designates as a regulated entity”.

Overview of IOSCO Research Report on Financial Technologies (Fintech)

Posted in Uncategorized
Shane C. D'SouzaHeidi GordonRene Sorell

Recently, the International Organization of Securities Commissions (IOSCO) released its Research Report on Financial Technologies (Fintech). IOSCO is an international body comprised of the world’s securities regulators including some Canadian securities commissions. Fintech is disintermediating and re-intermediating securities businesses. The Report studies the evolution of Fintech and its intersection with securities market regulation in the categories described below.

Alternative Financing Platforms

The Report examines peer-to-peer lending (P2P lending) and equity crowdfunding (ECF), noting that the significant growth of each is attributable to a series of supply and demand factors, including the current low-interest rate environment, which has driven investors to look for alternative investments (e.g. in the case of ECF, the ability to make early stage equity investments).

The risks and regulatory responses associated with P2P lending and ECF include the following: Continue Reading

Compensation obligatoire des dérivés de gré à gré par contrepartie centrale au Canada – Mise à jour

Posted in AMF, CSA
Sonia StruthersCandace PalloneMary Jeanne PhelanLaure Fouin

En 2015, les Autorités canadiennes en valeurs mobilières (ACVM) ont proposé de rendre obligatoire la compensation par contrepartie centrale de certaines transactions normalisées de dérivés de gré à gré en vue d’accroître la transparence sur le marché des dérivés de gré à gré et d’atténuer davantage le risque systémique avec le Règlement 94-101 sur la compensation obligatoire des dérivés par contrepartie centrale et l’Instruction générale relative au Règlement 94-101 (Règlement 94-101) ainsi que le Règlement 94-102 sur la compensation des dérivés et la protection des sûretés et des positions des clients et l’Instruction générale relative au Règlement 94-102 (Règlement 94-102).

Le Règlement 94-101 impose la compensation obligatoire par contrepartie centrale de certains dérivés de gré à gré normalisés, sous réserve des dispenses qui y sont prévues. Pour avoir un aperçu détaillé du Règlement 94-101, reportez-vous à notre article précédent sur le Règlement 94-101.

Le Règlement 94-102 vise à ce que la compensation des dérivés de gré à gré de clients locaux s’effectue de manière à protéger leurs positions et leurs sûretés et à renforcer la résistance des chambres de compensation à la défaillance d’un intermédiaire compensateur. Il prévoit des obligations en matière de séparation et de transférabilité des sûretés et des positions des clients ainsi que des obligations précises en matière de tenue de dossiers, de déclaration et de communication d’information. Pour avoir un aperçu détaillé du Règlement 94-102, reportez-vous à notre article précédent sur le Règlement 94-102.

Le 19 janvier 2017, les ACVM ont annoncé que, sous réserve de l’obtention des approbations nécessaires, le Règlement 94-101 entrera en vigueur le 4 avril 2017 et le Règlement 94-102, le 3 juillet 2017.

Les principales modifications apportées au projet de Règlement 94-102 de 2015 sont les suivantes : Continue Reading

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. Continue Reading

Mandatory Central Counterparty Clearing of OTC Derivatives in Canada – Update

Posted in AMF, CSA
Laure FouinCandace PalloneMary Jeanne PhelanSonia Struthers

In 2015, the Canadian Securities Administrators (CSA) proposed mandatory central counterparty clearing of certain standardized over-the-counter (“OTC”) derivatives transactions consistent with its goal to improve transparency in the OTC derivatives market and enhance the overall mitigation of systemic risk: National Instrument 94-101 Mandatory Central Counterparty Clearing of Derivatives and its related Companion Policy 94-101CP (NI 94-101) and National Instrument 94-102 Derivatives: Customer Clearing and Protection of Customer Collateral and Positions and its related Companion Policy 94-102CP (NI 94-102).

NI 94-101 requires certain counterparties to clear specified standardized OTC derivatives through a central counterparty clearing agency, unless an exemption is available in the instrument. For a detailed overview of NI 94-101, we refer you to our previous article on NI 94-101.

NI 94-102 is designed to protect a local customer’s positions and collateral when clearing OTC derivatives and to improve clearing agencies’ resilience to default by a clearing intermediary: it includes requirements related to the segregation and portability of customer collateral and positions as well as detailed record-keeping, reporting and disclosure requirements. For a detailed overview of NI 94-102, we refer you to our previous article on NI 94-102.

On January 19, 2017, the CSA announced that, subject to necessary approvals, NI 94-101 would come into force on April 4, 2017 and NI 94-102 would come into force on July 3, 2017.

The main amendments made to the 2015 proposed draft of NI 94-102 are as follows:

  • Options on securities are not subject to the segregation and portability requirements. They remain subject to applicable securities regulations or derivatives regulations (in Québec) in order to maintain some consistency with the approaches adopted in the United States (US) and the European Union (EU).
  • Record retention provisions have been amended to avoid duplicative retention of records by both the clearing agencies and clearing intermediaries.
  • Provisions relating to the transfer of a customer’s positions and collateral upon default by a direct intermediary provide more flexibility to facilitate the transfer.
  • Substituted compliance is available where a foreign clearing intermediary or regulated clearing agency in compliance with comparable laws of the US or the EU is involved in clearing a local customer’s cleared derivatives. However, the retention of records, reporting on customer collateral to the customer and the regulator, and the segregation of customer collateral from other property of the customer requirements still apply.
  • Information on customer collateral required to be reported to regulators is required on an aggregate basis, rather than on an individual customer basis; however, there is no substitute compliance for the customer collateral reports requirements.

The main amendments made to the 2015 proposed draft of NI 94-101 are as follows:

  • Affiliated entities of a clearing participant are subject to NI 94-101’s clearing obligation only if its month-end gross notional amount of outstanding OTC derivatives exceeds CAD$ 1 billion, excluding intragroup transactions. A 90 day transition period is provided to such affiliated entities following the date on which it reaches the CAD$ 1 billion threshold.
  • A six month transition period after the effective date of NI 94-101 (expected to be April 4, 2017) is provided to market participants that are not clearing participants, but are subject to NI 94-101, in order to set up clearing relationships.
  • The companion policy to 94-101 specifies that parties may rely upon factual statements of the other party to determine whether the other party is subject to NI 94-101, as long as it does not have reasonable grounds to believe such statements are false.
  • The companion policy to 94-101 clarifies how to treat swaptions, complex swaps and packaged transactions: (a) swaptions entered into before the effective date of NI 94-101, even physically settled after the effective date, do not have to be mandatorily cleared; (b) counterparties do not have to disentangle a mandatory clearable component of a complex swap in order to clear that portion; however (c) counterparties must clear each mandatory clearable component of packaged transactions.
  • Substituted compliance is available to foreign derivatives dealers who are “local counterparties” if the mandatory clearable derivative is submitted for clearing in accordance with the mandatory clearing rules in the US or the EU.

In Quebec, the Autorité des marchés financiers (AMF) has published consequential amendments to Regulation 91-506 respecting Derivatives Determination (Regulation 91-506) and its related Policy Statement to Regulation 91-506 respecting Derivatives Determination in order to include references to NI 94-101 and NI 94-102.

Regulation 91-506 currently determines the scope of application of Regulation 91-507 respecting Trade Repositories and Derivatives Data Reporting. Once NI 94-101 and NI 94-102 come into force, Regulation 91-506 will also determine the scope of derivatives subject to mandatory clearing and protection of customer collateral rules.

Update on the CSA’s “Proxy Plumbing” Initiative

Posted in Industry News, Proposals
Rene SorellHeidi GordonShauvik Shah

The Ontario Securities Commission (OSC) recently held a roundtable on the “Proposed Protocols for Meeting Vote Reconciliation”. The purpose of this roundtable was to discuss issues identified during the consultation phase 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 (Staff Notice) as well as to discuss the OSC’s proposed next steps in implementing the protocols outlined in Annex A of the Staff Notice, which protocols are intended to address some of the widely accepted issues with the proxy voting infrastructure.

 Background on the Proxy Plumbing Initiative

Shareholder voting in Canada generally occurs through proxy voting as well as in person attendance. As most shareholders are not registered shareholders and hold their shares through intermediaries, proxy votes are typically submitted by intermediaries and not the actual shareholder. Intermediaries in turn hold their shares with a central depository, the Canadian Depository for Securities Limited (CDS). This indirect manner of holding shares is known as the “intermediated holding system”.

Various entities implement the processes used to tabulate proxy votes for shares held through intermediaries. The OSC refers to these processes as “meeting vote reconciliation”.

There have been concerns raised by issuers and investors, as outlined in the Staff Notice, that the proxy voting infrastructure and meeting vote reconciliation systems are inaccurate, unreliable and non-transparent in the following respects.

  1. Over-voting: over-voting is an instance of an intermediary submitting proxy votes and the meeting tabulator being unable to establish that the intermediary has any vote entitlements, or the number of proxy votes submitted exceeds the number of vote entitlements as calculated by the tabulator.
  2. Missing votes: voting results suggest proxy votes were not included in the tabulation and therefore went “missing”. Beneficial owners largely cannot find out whether a tabulator or meeting chair accepted their intermediary’s proxy votes.

Proposed Protocols

The protocols outlined in the Staff Notice aim to address two key issues: information gaps and communication gaps.

Information gaps relate to the fact that 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.

To address information gaps, the protocols provide guidance on: (i) the vote entitlement information intermediaries should provide to tabulators and how to generate this information; (ii) how the tabulator should use this information to establish which intermediaries are entitled to vote, and how many proxy votes they can submit; (iii) how the tabulator can match proxy votes to vote entitlement positions; and (iv) what the tabulator should do if it appears that depositories or intermediaries have not provided necessary vote entitlement information.

Communication gaps relate to the fact that there is no way to accurately and efficiently confirm that all necessary information has been sent and received by tabulators and intermediaries, such that problems giving rise to proxy votes being rejected or pro-rated at meetings can be detected in advance.

To address communication gaps, the protocols outlined in the Staff Notice provide guidance on: (i) the OSC’s expectation regarding tabulators, intermediaries and Broadridge (the main proxy voting agent for intermediaries) developing appropriate mechanisms to confirm that all votes submitted by Broadridge on behalf of intermediary clients have been received by the tabulator, as well as appropriate mechanisms to do so; (ii) steps tabulators should take to obtain missing vote entitlement information if the intermediary appears to the tabulator to be in an over-vote position; and (iii) how parties should communicate with each other where proxy votes from an intermediary are rejected, uncounted or pro-rated to enable beneficial owners to know if proxy votes submitted in respect of their shares were not accepted at a meeting and the reason why.

Results of the Roundtable

Panelists at the November 18 roundtable included representatives from Broadridge, the Governance Professionals of Canada, the Securities Transfer Association of Canada and institutional investors. A transcript of the roundtable can be viewed here.

Industry participants were generally supportive of the proposed changes. One of the key impediments identified to improving the system was an over-reliance on paper based systems, the costs of transforming which are unknown at this time.

Panelists noted that the primary unsettled issue arising from any Canadian Securities Administrators (CSA) proxy infrastructure reforms would be the allocation of increased costs between participants. Likewise, it was suggested that efficiency gains from new technology, such as blockchain, could actually reduce the cost of meeting vote reconciliation procedures over time.

Looking Ahead

The OSC hopes that the protocols will eventually lay the foundation in the future to eliminate paper and move to an 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 proxies have been received and accepted by the tabulator.

The securities regulators aim to publish the final protocols as a CSA staff notice at the end of 2016 in time for the 2017 proxy season.