CSA propose proxy advisory firm guidance in respect of conflicts and transparency

April 24, 2014

The Canadian Securities Administrators today published for comment a proposed national policy intended to provide guidance to proxy advisory firms on recommended practices in respect of conflicts of interest, transparency and accuracy. The proposed guidance addresses comments from stakeholders provided in response to the CSA's Consultation Paper 25-401, published in June 2012.

Specifically, under proposed National Policy 25-201, proxy advisory firms would be expected to identify, manage and mitigate actual or potential conflicts of interest. The proposed guidance includes specific steps firms should consider to address such conflicts, including by establishing policies and procedures, internal safeguards and controls, and a code of conduct. Firms would also be expected to disclose conflicts of interest to clients.

Further, the CSA would expect proxy advisory firms to implement appropriate practices to promote transparency and accuracy of vote recommendations, including by potentially establishing and, to the extent possible considering the sensitivity of such information, disclosing the approach or methodologies used in the analysis leading to vote recommendations. Firms would also be encouraged to establish internal safeguards and controls to increase the accuracy and reliability of information and data used in the preparation of such recommendations. The guidance would further encourage firms to establish and disclose, again to the extent possible, the process followed in developing proxy voting guidelines.

Meanwhile, in response to concerns from issuers that proxy advisory firms have become de facto corporate governance standard setters, the proposed guidance reminds issuers that they may engage shareholders to address concerns that issuers have practices that differ from the standards set out in proxy advisory firms' proxy voting guidelines.

The CSA is accepting comments, including responses to a number of specific questions set out in the proposal, until June 23, 2014.

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