The Canadian Investor Relations Institute (CIRI), the lobby group for investor relations professionals, says it is time to start regulating proxy advisors.

CIRI made that recommendation in a comment submitted to the Canadian Securities Administrators (CSA).

Currently, proxy advisory firms are not subject to any regulatory oversight. In June, the CSA initiated consultations to determine whether any is needed.

CIRI said Wednesday that it believes that these firms should be subject to regulatory oversight “in order to ensure transparency and the quality of the shareholder vote,” which, it says, would also bolster the integrity of the Canadian capital market. CIRI argues that proxy advisors have increased influence on the proxy voting process; issue research reports with factual errors; and have demonstrated a lack of transparency and engagement.

CIRI reports that a recent survey of its members found that they frequently find factual inaccuracies in research and voting recommendations issued by proxy advisors; and, it says that survey respondents would also like to see proxy firms be required to disclose their methodologies, information sources, assumptions, and rationale for their voting recommendations. Also, 87% of respondents said that they should be required to disclose any issuer comments regarding the analysis, information used, and voting recommendations in their final reports.

“The current processes are flawed and lack transparency. All issuers should be engaged in the report review process to ensure factual accuracy,” says Tom Enright, president and CEO of CIRI. “With the proposed regulatory changes in place, we believe that shareholders would be better informed when voting their shares.”

In particular, CIRI recommends that proxy advisors be required to disclose their methodologies, sources, assumptions, and voting rationale; that issuers be given an opportunity to correct any errors in their reports and voting recommendations before they are distributed to shareholders; that their reports include issuer comments, and that a dispute resolution process be set up to resolve conflicts over concerns with report information. It also says that they should be required to disclose any conflicts; and that institutional investors be required to disclose how they assess advice from proxy firms, rather than simply following it.

The deadline for comments on the CSA paper is September 21.