Securities regulators are proposing a significant overhaul of the rules governing shareholder communications.

A set of proposed rule amendments was published for comment by the Canadian Securities Administrators on Friday. Among the changes being contemplated, the CSA is proposing to allow firms to employ a “notice-and-access” approach that would enable firms to point shareholders to their information circulars on the Internet, rather than sending a hard copy by mail.

This proposed procedure is similar to one introduced by the U.S. Securities and Exchange Commission. In the request for comments, the CSA notes that the U.S. model of notice-and-access “seems to have resulted in a decrease in voting by retail shareholders.” But the CSA stresses that its proposal has some significant differences from the U.S. model which are intended to minimize the impact on retail shareholders. Still, it invites comments on whether the approach could be improved to make it more user friendly.

The CSA indicates that this notice-and-access process would not apply to “special meetings” called to vote on fundamental changes, as it wants to monitor the new procedure before it considers applying it to these sorts of meetings too. It also intends to monitor developments in the U.S.

Additionally, the changes aim to simplify the beneficial owner proxy appointment process, and introduce new disclosure requirements in the proxy circular regarding the beneficial owner voting process, in an effort to increase transparency and help the voting process. The CSA also proposes a variety of other less significant changes.

The CSA says that the proposed amendments come in response to a review by CSA staff, which began in 2007, looking at the shareholder communications rules that were implemented in 2002. If implemented, it says that these changes will yield benefits, with little additional cost to market participants.

“The proposed amendments are intended to improve how issuers communicate with these investors,” said Jean St-Gelais, chair of the CSA and president & CEO of the Autorité des marchés financiers. “The proposals would modernize the communications options for issuers and enable investors to receive certain materials electronically.”

The proposed amendments are out for an exceptionally long 144-day comment period, ending August 31. The CSA explains that this is intended to accommodate the 2010 proxy season.

IE