CSA Proxy Voting Infrastructure

July 15, 2016

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CSA Proxy Voting Infrastructure

Letter Summary:

While guidance on enhanced communication with respect to vote entitlement information is helpful, the Protocols do not appear to directly address the issue that intermediaries may not have consistently accurate records relating to vote entitlements at the outset of the process, resulting in inaccurate information being communicated to the meeting tabulator. We understand that record keeping practices involving transactions such as securities lending contributes to the inaccuracy of voting entitlement records at the intermediary level. If securities in a securities lending pool are fungible, with the result that intermediaries cease to keep track of beneficial ownership rights for securities in the pool, both lenders and borrowers may end up trying to vote the same securities. While the Protocols indicate that intermediaries are expected to have processes to ensure the meeting tabulator has complete and accurate vote entitlement information, there is no specific requirement or guidance with respect to maintaining accurate beneficial ownership information with respect to voting entitlements for securities held in securities lending pools, margin accounts, and other such arrangements. It is necessary for all parties involved in the proxy voting process to maintain accurate records throughout the ownership change process in order for the communication guidelines in the Protocols to be most effective.

Overview of the Council’s Comments:

The CSA intends to monitor the voluntary implementation of the Protocols. We believe it would be helpful for the final Protocols to indicate explicitly that if the accuracy of the vote reconciliation process does not improve in the 2017 proxy season that the Protocols, and potentially additional rules, will become mandatory.