Soliciting Dealer Arrangements Under Review by CSA

April 27, 2018
  • The Canadian Securities Administrators (CSA) are seeking comments on soliciting dealer arrangements in an effort to assess whether any additional guidance or rules are required in respect of such arrangements.
  • While the use of soliciting dealer arrangements is not uncommon, the CSA notes that these arrangements may raise regulatory issues for dealers and issuers.
  • General comments and responses to specific questions posed are being accepted until June 11, 2018.

What is a Soliciting Dealer Arrangement?

The CSA uses the term “soliciting dealer arrangement” to refer to agreements entered into between issuers and registered investment dealers pursuant to which an issuer agrees to pay the dealer a fee for each security successfully solicited from a securityholder to:

  • Vote in connection with a matter requiring securityholder approval; or
  • Tender securities in connection with a take-over bid.

In many cases, fees paid to dealers are structured as success fees or paid only if securityholders vote in a particular way.

Regulatory Requirements

Proxy solicitation rules under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) and the Investment Industry Regulatory Organization of Canada’s (IIROC) rules impose requirements on issuers and dealers that impact soliciting dealer arrangements:

  • NI 51-102 prohibits proxy solicitation without the mailing of a proxy circular in prescribed form. While the definition of “solicit” is quite broad, exclusions from the definition are provided in NI 51-102.
  • IIROC Rule 42 Conflicts of Interest (Rule 42) imposes obligations – disclosure and otherwise - on Dealer Members and Approved Persons where there is an existing or potential material conflict of interest.

As noted above, soliciting dealer arrangements may raise regulatory issues with regard to conflict management on the dealer side and questions as to the integrity of a securityholder vote on the issuer side.

Request for Comment

For further information, please see CSA Staff Notice 61-303 and Request for Comment Soliciting Dealer Arrangements (April 12, 2018) which sets out the specific questions on which the CSA is soliciting input.

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