(September 5 – 15:30 ET) – The Canadian Securities Administrators has republished its latest proposed rule regarding benefical owners. The ruling requires a reporting issuer to send proxy-related materials to those beneficial owners of its securities who are not registered holders of its securities.
The new rule will also require issuers to provide procedures for the sending of proxy-related materials to beneficial owners, and impose obligations on various parties in the securityholder communication process.
National instrument 54-101 was first proposed in February 1998. Following a review of the comments received, the CSA published a second draft on July 17, 1998. In response to comments from the industry, the CSA is proposing a large number of amendments to the second draft and is republishing it for a third comment period.
The most controversial aspect of the rule, based on the comments, is the proposal to allow reporting issuers to deliver proxy-related materials directly to beneficial owners of their securities. The Investment Delears Association of Canada, Canada Trust, Canadian Bankers Association and others insist that the proposal risks creating “significant inefficiencies for those involved in the process of distributing securityholder materials”.
The Canadian Corporate Shareholders Services Association, however, indicated “its wholehearted support” for the rule, as did the Security Transfer Association of Canada.
The CSA says it has considered the concerns of creating inefficiencies compared to the existing process, but says it believes “the benefits that could result are so important that they outweigh efficiency concerns”. It notes that in response to the comments it surveyed 200 reporting issuers at random, including all the firms included in the TSE 35. It says, a majority of issuers that responded were either “unsatisfied” or “very unsatisfied” with the existing system of securityholder communications and that they would likely send proxies to beneficial owners.
The CSA says it hasn’t “been able to achieve a complete consensus concerning the proposed National Instrument, because certain market participants have mutually exclusive interests. The proposed National Instrument represents what the CSA believe is an appropriate balancing of interests.”
The CSA is now requesting another round of comments, including specific comment on the definition of “send” in electronic delivery. Comments are due by November 1.