Record Processing – New Fee Effective January 1, 2018

The Canadian Securities Administrators and industry representatives, including Broadridge, held a series of “Proxy Roundtable” meetings in order to create detailed operational protocols to tabulate votes through share positions held through intermediaries. On March 31, 2016, the CSA published its proposed protocols in its “Final Report on Review of the Proxy Voting Infrastructure and Request for Comments on Proposed Meeting Vote Reconciliation Protocols.”

Based on the input received through this consultation process, the CSA published Staff Notice 54-305 – Meeting Vote Reconciliation Protocols (SN 54-305) on January 26, 2017. SN 54-305 signals a shift in the regulatory framework supporting securityholder voting and the underlying processes that enable it. The new protocols outline a process of accountability whereby every securityholder, regardless of how their securities are held, will be given the opportunity to vote. Whereas the proxy process has historically been focused on distribution of materials, SN 54-305 centres on the vote entitlement of each securityholder to exercise the voting rights they acquired when they invested in a company. Market participants, including issuers, intermediaries, transfer agents and service providers like Broadridge, have clearly defined responsibilities as key entities for their respective parts of the securityholder voting process and those responsibilities will help ensure that every investor’s voting entitlement is supported. These changes are an important step toward end-to-end vote confirmation.

SN 54-305 recognizes that vote reconciliation needs to be accurate, reliable and accountable. It defines that meeting vote reconciliation would consist of several protocols. These protocols describe the administrative processes required to accurately report the full vote entitlement of positions and include:

• Accurate and complete vote entitlement information is provided to meeting tabulators for each intermediary who will solicit voting instructions from beneficial owners and submit proxy votes
• Meeting tabulators set up vote entitlement accounts for each intermediary in a consistent manner
• Accurate and complete proxy vote information is provided to the meeting tabulator, and they tabulate and record the proxy votes in a consistent manner
• Beneficial owners are informed if proxy votes submitted to the meeting tabulator in respect of their shares were not accepted at a meeting and the reason why

Each protocol also outlines a “responsible entity” or in some cases multiple entities the CSA expects will fulfill their role in the vote reconciliation process. The voluntary implementation of the protocols will be monitored by the CSA through the 2017 and 2018 proxy seasons to measure the impact of the protocols on the proxy process.

Broadridge has made the necessary process and system changes to support the processing of records for early search and record date. All records will now be votable and reconciled against the entitlements received from CDS, DTC and any omnibus entitlement. This additional level of detail will provide the foundation to develop end-to-end vote confirmation capability between participating entities.

To further support the proxy voting infrastructure, Broadridge made modifications to all omnibus proxies to clearly identify the entity and full vote entitlement of their positions. Broadridge provides omnibus proxies online and through electronic transmission, and in addition has built an auto fax delivery mechanism to provide each tabulator with an electronic image of the paper omnibus proxy. Broadridge is currently working with tabulators to provide the intermediary with confirmation of votes being rejected, prorated or accepted at the meeting as another step toward end-to-end vote confirmation.

Given the shift in focus to vote entitlement, Broadridge will process all records to create a voting file, and then will apply the issuer meeting selection type preference for which beneficial holders will receive proxy material. As a result, the loading and processing of all securityholder records along with the creation of full vote entitlement positions will result in a change to the current fee schedule for beneficial record processing. A new “Record Processing Fee” of $0.125 will be applied to all remaining records not included in the material selection type effective for record dates after January 1, 2018 for proxy related distributions through Broadridge. The $1.00 fee remains unchanged in connection with the securityholder records based on the meeting type as well as securityholder preferences for the distribution of proxy material. This fee will now be referred to as the Distribution Processing Fee. The fees for NOBO lists will not change.

Broadridge remains committed to supporting the evolving proxy system for issuers, intermediaries, investors and all other constituents of this critical capital markets infrastructure.

If you have any questions regarding these changes and their impact on your 2018 proxy project, please contact your Account Representative or Sales Executive. Alternatively, you can contact Broadridge at client.relations@broadridge.com.

CSA Staff Notice 54-305 is available at:
http://www.securities-administrators.ca/aboutcsa.aspx?id=1553&terms=54-305

Frequently asked questions:  

1. What additional record processing did Broadridge have to undertake in order to comply with the new protocol?
   All securityholder records received from intermediaries are being processed within the proxy job in order that all position entitlements are made available to be reconciled to the CDS, DTC and any omnibus positions the tabulator receives. Securityholder mailings continue to be processed based on the meeting type determined by the issuer and material selection preferences provided by intermediaries. As a result of all securityholder records being loaded to the proxy job, all records will be assigned a voting control number and are eligible to vote regardless of whether the issuer determined the securityholder to receive the notice of the meeting.
   
   Prior to the system changes, only those securityholder records specific to the meeting selection type and material preference of the securityholder were included in proxy job processing.
2. Was Broadridge not already doing this processing prior to the introduction of this new protocol?
   Broadridge has always received all securityholder records in response to the Request for Beneficial Ownership Information and for the creation of NOBO lists. The NOBO lists were generated based on the “raw” data provided by the intermediaries. We will process all securityholder records in order to validate vote entitlements for each record. NOBO lists will be reconciled against the entitlements prior to the release to the issuer or their agent.
3. Are there any benefits to having all securityholders in the proxy job, even though my company usually holds annual meetings?
   Issuers will now have the flexibility to change the parameters of the material selection at any time prior to mailing. Securityholders who do not receive material but want to vote can be provided with a control number by their intermediary. All securityholders of record are eligible to vote at the meeting regardless of the material selection preference.
4. Will having all securityholders in my proxy job affect the Advance Payment Request?
   Yes, the Advance Payment Request will now reflect all record positions in the proxy job.
5. Are there any other additional fees, like print or postage costs or intermediary access fees?
   No. The only new fee is the Record Processing Fee.