Citing the importance of proxy voting to the capital markets in Canada, the Canadian Securities Administrators today published for comment a consultation paper setting out a proposed approach for addressing concerns regarding the integrity and reliability of the proxy voting infrastructure.

In considering the reasoning behind addressing proxy voting, the CSA identified a number of factors that contribute to the complexity of proxy voting and vote reconciliation, specifically the intermediated system of holding securities that supports clearing and settlement, securities lending, the use of voting agents by investors and the right of investors to not disclose their identities.

Ultimately, the CSA identified two main issues for examination. First, the CSA questioned whether accurate vote reconciliation is occurring within the proxy voting infrastructure. On that point, the CSA noted that the intermediated holding system resulting in one share having multiple associated entitlements creates a risk that valid proxy votes submitted to the tabulator may be discarded because they can't be properly matched to an appropriate omnibus or registered position. Further, share lending creates a risk that the same share could be voted multiple times.

The CSA also noted that investors do not currently have the ability to confirm that voting instructions they submit to intermediaries have been received and counted. As such, the paper considers the type of end-to-end vote confirmation system that should be added to the proxy voting infrastructure. On each issue, the consultation paper poses a number of questions specific of stakeholders, and the CSA intend to initiate external consultations, including possible roundtable discussions, to consider possible policy initiatives. Notably, the paper stresses that the CSA have not come to any conclusions as of yet as to whether any specific regulatory measures are required.

The CSA are accepting comments on the consultation paper until November 13, 2013. For more information, see CSA Consultation Paper 54-401.