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Letter Summary:
This consultation relates to proposed changes to the governance framework for federally regulated financial institutions (FRFIs). The proposals reflect some changes already made to corporate legislation regarding diversity disclosure requirements. For example, the CBCA requires public companies to disclose representation of women, visible minorities, Indigenous peoples, and people with disabilities in management and on the board of directors, as well as a company’s policies and targets (or lack thereof). The consultation requests comments on applying the CBCA’s “comply or explain” provisions, as well as whether additional compliance measures should be added. The consultation also seeks feedback on permitting “all virtual meetings”, as well as on the considerations for the use of electronic communications with owners / shareholders of FRFIs for governance documents, including a “ notice and access” model or, similar to the CSA’s recent proposals, an “access equals delivery” model.
Overview of the Council’s Comments:
We strongly support efforts to foster inclusion and diversity in companies and other institutions and encourage the regulator to look beyond the current diversity requirements and consider more ambitious emerging paradigms. We also support engaging with owners/investors in Federally Regulated Financial Institutions (FRFIs) through electronic means as long as the materials are easily accessible through an advanced and easy-to-use system, and paper copies are easily available to investors without charge.
Our comments on the consultation questions on the diversity disclosure requirements for FRFIs are summarized below:
- We believe the expectations for disclosure relating to senior management in the CBCA will not necessarily work well with all types of financial institutions, and clear definitions should be included to be consistent over time.
- We think the scope and content of the CBCA’s disclosure requirements are appropriate for financial institutions, although more granular disclosure should be considered for each business line in an FRFI.
- We also believe the four designated groups outlined in the CBCA provide a starting point and assessing the state of diversity should encompass representations of 2SLGBTQI+ and diverse gender identities. We support the separate classification of Indigenous peoples outside of the category of visible minorities.
- We generally agree that the CBCA diversity disclosures help inform investment/voting decisions for investors. Given the size and complexity of some FRFIs, we think some generalized disclosures about the board and senior management do not appropriately capture all relevant levels and business lines.
- We think the requirements should apply to all FRFIs. We do not believe the impact of these disclosure requirements on non-distributing FRFIs differs materially.
- We believe FRFIs could be mandated to set their own targets for improved diversity and support publicly disclosing these targets as a way of driving them to achieve those goals.
- We think director term limits create more opportunities to recruit diverse candidates.
- We believe there should be prescribed minimum disclosure for comparability purposes but have concerns that a prescribed form may unduly circumscribe additional incremental disclosure.
- We also believe that FRFIs will be best motivated to achieve compliance through the proposed enhanced disclosure requirements.
CFA Institute’s Diversity, Equity, and Inclusion Code (the “DEI Code”) provides guidance and practical ways that could be further explored relating to this Consultation.
Our comments on the consultation questions on electronic communications and virtual only meetings are summarized below:
- We generally support an access equals delivery model. However, the current interface of SEDAR makes it difficult for many investors to easily locate and access the relevant documents. We believe the implementation of an access equals delivery model should be delayed until the roll-out of SEDAR+ is complete.
- We agreed with the CSA’s proposal to implement an access equals delivery model in stages, with documents requiring immediate shareholder attention continuing to be delivered in paper format.
- We would support regulation that requires FRFIs to mention in the press release how to access paper copies.
- We do not have any objections to an FRFI holding a virtual shareholder meeting, noting the importance that the meeting materials are easily accessible and that questions are addressed equitably at the meeting.
- We believe the risks and opportunities are similar for both distributing and non-distributing FRFIs.
- We believe the elements listed in question 9 will all help ensure that communication during virtual meetings is effective, and it will be important to ensure that the needs of persons with disabilities can be accommodated.