The Canadian Foundation for the Advancement of Investor Rights (FAIR) is urging the Toronto Stock Exchange to adopt shareholder approval requirements consistent with other major financial markets and global corporate governance best practice.

FAIR Canada has written to the CEO of the TSX outlining its views.

“TSX shareholder approval requirements fail to meet the standards set by the major exchanges such as NYSE, London Stock Exchange and HKEX or standards set by international organizations,” says Ermanno Pascutto, executive director of FAIR Canada.

“In leading securities markets a major transaction involving the issuance of shares representing 20% or more would require shareholder approval. The TSX permits listed companies to dilute existing shareholders by issuing as much as 100% or more shares without the need of shareholder approval. The quality of the TSX market place is undermined by permitting such transactions to proceed without shareholder approval.”

Corporate governance standards published by international organizations such as the Organization for Economic Development and Cooperation (OECD) and the International Corporate Governance Network require shareholder approval for major transactions especially where the transaction would materially dilute existing shareholders, FAIR Canada notes.

“Canada was once a leader in corporate governance and securities regulation. Now we have fallen behind international best practice. The ability of a board of directors to disregard the views of the owners of the listed company reduces confidence in the integrity of the TSX market,” says Pascutto.

The TSX was allowed to continue to regulate listed companies even after it demutualized and became a listed “for profit” company. There is an inherent conflict between the “for profit” status of the TSX and it acting as a regulator of listed companies, FAIR Canada says.

If the TSX is to retain its role as a regulator of listed companies it needs to act in the best interests of the markets and not simply seek to please the management of listed companies who disregard the views of the majority of their own shareholders, the association says.


FAIR Canada says its mission is to be a national voice for investors on securities regulation and a catalyst for enhancement of the rights of Canadian shareholders and retail investors.

A copy of the FAIR letter to the TSX is available on the FAIR Canada Web site.

IE