Securities regulators are giving the industry another month to contemplate the possible regulation of proxy advisors.
Back in June, the Canadian Securities Administrators (CSA) published a consultation paper setting out possible options for regulating the firms that provide voting recommendations to shareholders on issuer and shareholder proposals and M&A transactions, among other services.
The comment period on that paper is scheduled to close on August 20. However, heeding calls for more time to consider the issues raised in the paper, regulators announced Thursday that they have decided to extend the deadline to September 21.
The paper spells out the regulatory concerns with the services provided by proxy advisory firms and their potential impact on the capital markets, including: conflicts of interest; a perceived lack of transparency; potential inaccuracies and limited engagement with issuers; corporate governance implications; and, the extent of reliance by institutional investors on their recommendations.
Currently, the activities of proxy advisory firms are not subject to any regulatory oversight. The CSA’s consultation aims to determine whether any is needed — whether there is actually a problem that requires regulatory intervention. And, if so, what they should do about it. If regulation is warranted, the paper suggests that the CSA would likely adopt a new regulatory framework that would apply specifically to proxy advisory firms.