The Canadian Securities Administrators (the “CSA”) recently issued Staff Notice 52-330 – Update on CSA Consultation Paper 52-404 Approach to Director and Audit Committee Member Independence (the “Staff Notice”). The Staff Notice reports on a consultation paper (the “Consultation Paper”) that the CSA issued last year. The Consultation Paper was aimed at soliciting views on the appropriateness of the CSA’s approach to determining director and audit committee member independence. To learn more about the Consultation Paper, see our previous post.
The Staff Notice summarizes feedback received in response to the Consultation Paper, and outlines the CSA’s rationale for maintaining the current approach.
In response to the Consultation Paper, the CSA received 27 comment letters from various market participants. Most commenters expressed general support for the CSA’s current approach to determining director and audit committee member independence. These commenters indicated that the current approach is appropriate for all issuers in the Canadian market and prefer maintaining such an approach on the basis that it is well-understood by market participants and that it is generally aligned with the approach applicable in the United States.
Although some commenters suggested modifying the current approach, there were no common trends or views in respect of suggested changes. As a result, the CSA concluded that it is appropriate to maintain its current approach to determining director and audit committee member independence.
The CSA also noted that its current approach has been in place since 2004 and that stakeholders understand and have adapted accordingly and making changes to the current approach could result in additional costs for issuers and efforts for investors to adapt to such changes. The CSA is of the view that any potential benefits of a change to the current approach are outweighed by the potential negative impact of implementing such a change.