The Ontario Securities Commission has released its reasons in the dispute over the CI Financial Corp. shareholder rights plan, in which the commission ruled that the Toronto Stock Exchange didn’t have the jurisdiction to interfere with the vote on that plan.
The case involved a dispute between CI and Bank of Nova Scotia, in which Scotiabank was seeking the right to be allowed to vote on the continuation of CI’s shareholder rights plan. CI denied that on the basis that, as a large shareholder of the firm, Scotiabank was not independent. The bank sought, and received, a ruling from the TSX listing committee that would have allowed it to vote.
However, CI successfully appealed that ruling to the OSC back in May. The OSC found that the TSX did not have jurisdiction to order that the mid-term vote on the ratification of the continuance of CI’s shareholder rights plan should be subject to a two-tiered vote, as the vote on the continuation of the plan did not involve the issuance of securities, and is therefore not a transaction that falls under the TSX’s purview.
The decision says that while the TSX Manual explicitly grants the TSX jurisdiction over the initial adoption of plans and amendments to existing plans. There is no similar grant of jurisdiction over the continuation of plans mid-stream, it notes. And, the decision says that the TSX’s discretion over the initial approval of transactions does not continue for the entire life of a transaction. Therefore, the OSC found the exchange’s jurisdiction is limited to transactions involving the issuance or potential issuance of securities.
As a result, the TSX decisions requiring a two-tiered vote were set aside, and only the independent shareholders of CI were entitled to vote on the resolution ratifying the continued existence of the plan.