Proposed National Instrument, Forms and Companion Policy: NI - 54-101 - Communication with Beneficial Owners of Securities of a Reporting Issuer
Proposed National Instrument, Forms and Companion Policy: NI - 54-101 - Communication with Beneficial Owners of Securities of a Reporting Issuer
NOTICE OF PROPOSED CHANGES
TO PROPOSED NATIONAL INSTRUMENT 54-101
FORMS 54-101F1, 54-101F2, 54-101F3, 54-101F4,
54-101F5, 54-101F6, 54-101F7 AND 54-101F8
AND COMPANION POLICY 54-101CP
AND RULE 54-801
AND
RESCISSION OF NATIONAL
POLICY STATEMENT NO. 41
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
Substance and Purpose of Proposed National Instrument
Introduction
On February 27, 1998, the Canadian Securities Administrators (the "CSA") published for comment proposed National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer (the "National Instrument"), Forms 54-101F1, 54-101F2, 54-101F3, 54-101F4, 54-101F5, 54-101F6,54-101F7 and 54-101F8 (the "Forms"), the proposed Companion Policy 54-101CP (the "Companion Policy") and, in Ontario, the proposed Implementing Rule54-801.(1) The comment period for these materials expired on May 29, 1998.
During the comment period, the CSA received submissions from a broad range of commenters. The list of commenters is contained in Appendix A of this Notice, and the summary of their comments, together with the CSA responses to those comments, are contained in Appendix B of this Notice. As the result of consideration of the comments, the CSA are proposing a number of amendments to the materials published in February, and are therefore republishing for a second comment period the proposed National Instrument, the Forms and the Companion Policy. No changes are proposed to be made to the Implementing Rule54-801 in Ontario.
Through these proposed instruments, the CSA seek to continue, with some changes, the regulatory regime concerning communication with beneficial owners of securities of a reporting issuer currently embodied in National Policy Statement No. 41 ("NP41"), which the instruments will replace.
The CSA are not publishing with this Notice, proposed National Instrument 54-102 Supplemental Mailing List and Interim Financial Statement Exemption, which replaces the provisions of NP41 and associated rules and blanket orders pertaining to supplemental mailing lists. That instrument was published for comment in February with the proposed National Instrument, but will not be republished for comment. National Instrument 54-102 is expected to be adopted by the CSA at the same time as the proposed National Instrument, without material changes from the version that was published in February.
The proposed National Instrument and Companion Policy are initiatives of the CSA, and the proposed National Instrument is expected to be adopted as a rule in each of British Columbia, Alberta, Manitoba, Ontario and Nova Scotia, as a Commission regulation in Saskatchewan, and as a policy in all other jurisdictions represented by the CSA. The proposed Forms will be adopted as rules in Ontario. The proposed Companion Policy is expected to be implemented as a policy in all of the jurisdictions of the CSA.
In this Notice, the versions of these materials published in February are called the "Draft National Instrument", the "Draft Forms" and the "Draft Companion Policy", respectively.
Substance and Purpose of the Proposed National Instrument, Forms and Companion Policy
The substance and purpose of the proposed National Instrument, Forms and Companion Policy are to provide a procedure to enable a reporting issuer to send securityholder materials, including proxy-related materials and annual reports, to beneficial owners of its securities who are not registered holders of its securities, and to impose obligations on various parties in the securityholder communication process.
For additional information concerning the background of the proposed National Instrument, Forms and Companion Policy, reference should be made to the notice (the "February Notice")(2) that accompanied the publication of the Draft National Instrument, Draft Forms and Draft Companion Policy.
Summary of Changes to the Proposed National Instrument from the Draft National Instrument
This section describes changes made in the proposed National Instrument from the Draft National Instrument. For a detailed summary of the contents of the Draft National Instrument, reference should be made to the February Notice.
Definitions
Changes from the Proposed National Instrument
The spelling of "depositary" has been changed to "depository" in response to a comment that this spelling better reflects industry practice.
A definitions of "FINS" has been added for convenience of reference.
The definition of "intermediary" has been amended by the addition of paragraph (c), which has the effect of ensuring that a beneficial owner of a security cannot be an intermediary in respect of that security. This change was made in response to a comment to ensure that persons or companies holding securities on behalf of others and that have discretionary authority over those securities not be considered intermediaries under the proposed National Instrument. Persons or companies that have discretionary authority over the securities, and thus have authority to provide instructions in a client response card, will be beneficial owners under this Instrument. The scheme of the proposed National Instrument does not contemplate that a person or company can be both beneficial owner and intermediary with respect to the same security.
The definitions of "non-objecting beneficial owner" and "objecting beneficial owner" have been amended to reflect changes made to section 3.3 of the proposedNational Instrument, which now permits an intermediary to rely upon instructions given by clients under NP41. The Draft National Instrument would haverequired intermediaries to send out client response cards to all clients, even if they had provided responses under NP41. The CSA are proposing this change inresponse to comments received concerning the inconvenience and expense associated with the approach contemplated in the Draft National Instrument.
The definition of "non-objecting beneficial owner list" has been amended to contemplate both an electronic and non-electronic form of the list. The Draft National Instrument contemplated only an electronic form of the list. The CSA are permitting the preparation of NOBO lists in non-electronic form, at the specific request of the issuer or other person or company authorized to request this list; this request would be made in the request for beneficial ownership information (Form 54-101F2). This change is proposed in response to comments that certain issuers and third parties may not have the technical capacity to receive an electronic list.
A definition of "NP41" has been added for convenience of reference. The definition includes a rule based on National Policy Statement No. 41, as, in Ontario, National Policy Statement No. 41 was made into a rule under the amendments to the Securities Act (Ontario) in 1995.
A definition of "preferred language of communication" has been added for convenience of reference.
The definition of "routine business" has been amended by the addition of one item and the amendment of another. The definition has been expanded by the addition of the "setting or changing of the number of directors to be elected within a range permitted by corporate law" under certain circumstances. This provision has been added in response to a comment received that some corporate statutes require or permit the securityholders to set the number of directors tobe elected, and that this is properly treated under this Instrument as "routine business". The definition has also been amended by now providing that only a" reappointment of an incumbent auditor" is routine business, rather than the appointment of any auditor as provided for in the Draft National Instrument. This amendment was made in response to comments that only the reappointment of an incumbent auditor should be considered to be routine business; the appointment of an auditor could include a change of auditor, which should not be regarded as routine business.
In addition, in connection with the definition of "send" used in the proposed National Instrument, a number of changes have been made throughout the Instrument to ensure that the term "send" is used to describe the delivery of a document or information. In the Draft National Instrument, other terms, such as "deliver" or "provide" were used in some places.
Section 1.5
Section 1.5 provides that fees payable under the proposed National Instrument shall be in amounts specified in Appendix A.
Changes from the Draft National Instrument
Section 1.5 is new and was added to simplify the drafting of the fees sections of the proposed National Instrument. In conjunction with this change, references to amounts of fees have been moved to an Appendix, rather than being contained in the proposed National Instrument.
Section 2.2
Changes from the Draft National Instrument
Subsection (1) of section 2.2 has been amended to delete the minimum notice period of eight business days before the record date for notice for a reporting issuer to send a notification of meeting and record dates. This change has been made in response to comments, to attempt to give reporting issuers flexibility to call meetings on an expedited basis.
Section 2.5
Changes from the Draft National Instrument
Subsection (1) of section 2.5 has been amended to delete the minimum period of five business days before the record date for notice for sending a request forbeneficial ownership information to proximate intermediaries. Like subsection 2.2, this change has been made in response to comments, to attempt to givereporting issuers flexibility to call meetings on an expedited basis.
Subsection (3) of section 2.5 has been amended to require that a statutory declaration be given with a request for beneficial ownership information that includes a request for NOBO lists, rather than an undertaking as provided for in the Draft National Instrument. The statutory declaration confirms the obligations ofpersons or companies with respect to beneficial owner lists.
Section 2.9
Section 2.9 provides that a reporting issuer that has stated in its request for beneficial ownership information sent in connection with a meeting that it will sendproxy-related materials to, and seek voting instructions from, NOBOs shall send, at its expense, at least 21 days before the date fixed for the meeting, theproxy-related materials for the meeting, subject to section 2.10, directly to the NOBOs on the NOBO lists received in response to the request.
Changes from the Draft National Instrument
This section has been amended from the Draft National Instrument to provide that a reporting issuer is required to send materials to NOBOs at least 21 daysbefore the date fixed for the meeting only if the reporting issuer has indicated in the request for beneficial ownership information that it will send the materials to,and seek voting instructions from, NOBOs. The Draft National Instrument required these materials to be sent this way if the request for beneficial ownershipinformation was given in connection with a meeting. The CSA recognize that there may be circumstances in which a reporting issuer wishes to communicatewith, and send materials to, NOBOs in connection with a meeting, while allowing the intermediaries to attend to the formal delivery of the proxy-relatedmaterials and the obtaining of voting instructions. In such circumstances, the requirements of this section will not apply to the reporting issuer.
In addition, this section has been amended to explicitly state that the sending of materials to NOBOs by a reporting issuer is at the expense of the reportingissuer. This was implicit, but not stated explicitly, in the Draft National Instrument.
Section 2.10
Section 2.10 provides that a reporting issuer that uses a NOBO list to send securityholder materials directly to NOBOs on the NOBO list shall not send thesecurityholder materials to NOBOs that are identified on the NOBO list as having declined to receive those materials unless the reporting issuer has specified inthe request for beneficial ownership information in connection with the sending of the materials that the securityholder materials will be sent to all beneficialowners of securities.
Changes from the Draft National Instrument
This section has been amended to permit a reporting issuer to override the election of securityholders not to receive certain materials. A reporting issuer wouldstate its intention in that regard in the request for beneficial ownership information sent in connection with the meeting.
Section 2.11
Changes from the Draft National Instrument
The word "beneficial" has been deleted from the prescribed text contained in the section in order to make the required text easier to read.
Section 2.14
Subsection 2.14(1) requires a reporting issuer that sends securityholder materials to NOBOs through a proximate intermediary to pay a fee, the actual cost ofpostage and, if the materials are not sent by first class mail, the reasonable costs of preparation for mailing, to the proximate intermediaries for sendingsecurityholder materials on to NOBOs. Paragraph (c) requires the reporting issuer to pay to the proximate intermediary the reasonable costs associated with thepreparation by the proximate intermediary of the securityholder materials for mailing, if the material are not sent by first class mail.
Subsection 2.14(2) requires a reporting issuer that sends securityholder materials, indirectly through a proximate intermediary, to OBOs that have declined inaccordance with the proposed National Instrument to receive those materials to pay a fee to the proximate intermediary for sending the materials on to thoseOBOs. In such circumstances, the reporting issuer is also required to pay the actual cost of postage, as in subsection (1).
Changes from the Draft National Instrument
The CSA have added paragraph (c) to subsection (1) to reflect the fact that it may be more economical in some mailings to send securityholder materials by otherthan first class mail. In such circumstances, the proximate intermediaries must sort the materials before delivery to the post office, and this provision permits theproximate intermediary to recover its costs in that regard. The request for beneficial ownership information permits the reporting issuer to designate how itwishes the materials to be sent to securityholders. The CSA expect that issuers will agree on the amount of these costs before the mailing to enable the issuer todetermine whether it wishes the materials to be sent by first class mail or otherwise.
With respect to subsection (2), the CSA are proposing to amend the fee arrangements from those proposed in the Draft National Instrument. The proposedNational Instrument now proposes that reporting issuers pay the cost of distribution of securityholder materials to OBOs only in respect of distributions to thoseOBOs that had declined to receive the materials. The proposed National Instrument does not carry forward the proposal contained in the Draft NationalInstrument whereby a reporting issuer that sends securityholder materials to NOBOs indirectly through a proximate intermediary would compensate theproximate intermediary for the costs associated with delivery to all beneficial owners of securities, including all OBOs. This proposal has not been carriedforward due to the fact that the approach in the proposed National Instrument is more consistent with the principle of OBOs bearing the cost of confidentiality.
Section 3.3
Section 3.3 provides that an intermediary that holds securities on behalf of a client in an account that was opened before the proposed National Instrument comesinto force may follow the steps required for new clients under the proposed National Instrument; i.e. sending an explanation to clients and a client response cardand seeking responses from the client in connection with the disclosure of client information, the receipt of securityholder materials and the preferred language ofcommunication. Alternatively, the intermediary may rely upon the choices previously made by the client under NP41 in respect of that account. An intermediarythat follows the steps required for new clients may not rely on instructions or deemed instructions received from the client under NP41.
Changes from the Draft National Instrument
The CSA have amended this section to allow intermediaries to rely upon instructions, or the effect of NP41, with respect to existing clients, as the choices madeby clients under NP41, and the consequences of not making those choices, are very similar to those made under this Instrument. An intermediary may seek newinstructions from existing clients if it so chooses, in which case it may not rely upon the NP41 approach with respect to those clients. The Draft NationalInstrument proposed that intermediaries be required to seek new instructions from all clients.
Section 3.7
Subsection 3.7(1) provides that an intermediary that sends securityholder materials to an OBO in accordance with this Instrument is entitled to recover from theOBO the reasonable costs, including postage, incurred by the intermediary in sending the securityholder materials to the OBO.
Subsection 3.7(2) provides, despite subsection (1), that an intermediary is not entitled to recover its costs in sending securityholder materials to an OBO that hasdeclined in accordance with this Instrument to receive those materials if the intermediary has sent those materials as the result of the reporting issuer specifying inthe request for beneficial ownership information sent in connection with the sending of materials that the securityholder materials shall be sent to all beneficialowners of securities.
Changes from the Draft National Instrument
The proposed National Instrument now provides that OBOs may be responsible for the costs associated with the delivery of materials to them in allcircumstances, other than when materials that have been declined by the OBOs are sent. This approach is consistent with the approach taken in NP41, andrecognizes that securities legislation in a number of jurisdictions allocates to the client any costs related to the sending of securityholder materials byintermediaries (for example, section 165 of the Securities Act (Quebec) and section 79(2)(b) of the Securities Act (Alberta). This replaces the approach proposedin the February Draft, in which reporting issuers would bear the cost associated with the sending of materials by intermediaries to OBOs if the reporting issuerschose to send materials to NOBOs indirectly.
Deletions from Part 3
Section 3.5 of the Draft National Instrument has been deleted. That provision required that an intermediary make all necessary arrangements to permit theinstructions requested in a client response card to be returned to the intermediary at no cost to the client. Upon consideration, the CSA have no objection toarrangements whereby clients are responsible for some of the costs, such as postage, for providing instructions to an intermediary. The CSA consider thisbusiness matter best left between the client and the intermediary.
Section 4.1
Subsection (2) of section 4.1 provides that in the case of a request sent in connection with a meeting, a proximate intermediary is to respond within threebusiness days of the request, and if the request contains a request for a NOBO list, to provide the NOBO list in electronic format within three business days afterthe record date for notice of the meeting. If the reporting issuer has indicated in the request that it will send materials and seek voting instructions from NOBOs,the proximate intermediary is also required to provide an omnibus proxy appointing management of the reporting issuer proxy for NOBOs.
Changes from the Draft National Instrument
Subsection (2) of section 4.1 has been revised from the corresponding provision of the Draft National Instrument to require that the reporting issuer is entitled toreceive an omnibus proxy appointing management of the reporting issuer as the proximate intermediary's proxy holder if the reporting issuer has indicated in therequest for beneficial ownership information that it will send the materials to, and seek voting instructions from, NOBOs. The CSA recognize that there may becircumstances in which a reporting issuer wishes to communicate with, and send materials to, NOBOs in connection with a meeting, while allowing theintermediaries to attend to the formal delivery of the proxy-related materials and the obtaining of voting instructions. In such circumstances, the omnibus proxywould remain with the proximate intermediary and would not be delivered to the reporting issuer.
Section 4.2
Section 4.2 provides that intermediaries that receive securityholder materials for sending to beneficial owners of securities shall send those materials within thetime periods provided for in that section.
Changes from the Draft National Instrument
Section 4.3 has been amended by the addition of the words "subject to securities legislation" in paragraphs (1)(a) and (b) and 2(a). This addition recognizes thatthe securities legislation of some jurisdictions permits some intermediaries to decline to send on those materials unless the reporting issuer or the beneficial ownerhas agreed to pay the costs of that sending of materials.
Section 4.3
Section 4.3 provides that, except as required by securities legislation, an intermediary that receives securityholder materials that are to be sent to a beneficialowner of securities shall not send the securityholder materials to the beneficial owner if the beneficial owner has declined in accordance with this Instrument toreceive the securityholder materials unless the reporting issuer has specified in the request for beneficial ownership information in connection with the sending ofmaterials that the securityholder materials shall be sent to all beneficial owners of securities.
Changes from the Draft National Instrument
The section corresponds to section 2.10, and now provides that securityholder materials will not be sent to OBOs that have declined to receive them except if thereporting issuer has indicated in the applicable request of beneficial ownership information that the materials shall be sent to all beneficial owners of thesecurities.
Section 6.1
Section 6.1 permits any person or company to request a reporting issuer to send to it the most recently prepared NOBO lists for each intermediary holdingsecurities of the reporting issuer that are in the reporting issuer's possession. The request is to be accompanied by a statutory declaration of the person orcompany in the required form. The reporting issuer is required to deliver the lists within three business days of the request upon receipt of a fee for preparing thelists for sending under section 6.1.
Subsection 6.1(4) provides that a reporting issuer shall delete from NOBO lists sent under section 6.1 the FINS numbers referred to in the required form and anyother information that would identify the intermediary through which a NOBO holds securities.
Changes from the Draft National Instrument
The CSA are proposing to put third parties, to the extent possible, in the same position as reporting issuers in respect of obtaining information concerningbeneficial owners of securities of the reporting issuer. The CSA have eliminated the need to make requests for NOBO lists only through reporting issuers thatwas contained in section 6.1 of the Draft National Instrument, and have therefore provided in section 6.2 that third parties have substantially the rights and aresubject to the obligations of reporting issuers under the proposed National Instrument. Reporting issuers will be provided with copies of requests for NOBO listsmade by third parties.
As a matter of convenience, the CSA are proposing section 6.1, whereby a third party can obtain from a reporting issuer the most recent NOBO lists in thepossession of the reporting issuer upon payment of a fee. The proposed National Instrument provides that the FINS numbers be deleted from NOBO lists sentunder this section in order to protect sensitive information concerning the identity of the intermediaries through which securities are held.
Section 6.2
Section 6.2 provides that a person or company may take any action permitted under the proposed National Instrument to be taken by a reporting issuer and, in sodoing, has all the rights, and is subject to all of the obligations, of a reporting issuer in connection with that action.
In connection with actions taken under subsection (1) by a person or company, references in the proposed National Instrument and the proposed Forms to a"reporting issuer" shall be read as references to the person or company, other than, under subsection (3), certain listed sections. Subsection (3) removes from theoperation of this section provisions relating specifically to the calling of meetings and the obtaining of voting instructions through omnibus proxies provided tomanagement of the reporting issuer.
Subsection 6.2(4) also provides that a person or company that sends an intermediary search request under section 2.3 or a request for beneficial ownership undersection 2.5 shall concurrently send a copy of that request to the reporting issuer of the securities to which the request relates.
Changes from the Draft National Instrument
Section 6.2 has been revised from the corresponding provision of the Draft National Instrument to better reflect the intention of the CSA that third parties shouldhave the same rights as a reporting issuer in requesting searches and arranging for the delivery of materials to securityholders, except for specified reportingissuer matters.
In conjunction with this approach, section 5.4 of the Draft National Instrument has been deleted. That provision specifically provided for the ability of thirdparties to make an intermediary search request to a depository in substantially the same manner as a reporting issuer. This specific provision is unnecessary inlight of section 6.2, which would give third parties generally the same rights as reporting issuers.
Deletions from Part 8
Section 8.3 of the Draft National Instrument, like section 4.5 of the Draft National Instrument, has been deleted. This section required a person or companyrequesting voting instructions from a beneficial owner to make arrangements to ensure that there would be no cost to the beneficial owner in providing theinstructions. Upon consideration, the CSA have no objection to arrangements whereby a beneficial owner is responsible for some costs, such as postage, inconnection with providing instructions.
Part 10
Part 10 has been amended to provide more generous transitional provisions than contained in the Draft National Instrument. The CSA are continuing to proposethat the proposed National Instrument come into force on January 1, 1999 but are proposing that the proposed National Instrument will apply to the sending ofproxy-related materials for meetings held on or after October 1, 1999, and that the proposed National Instrument will apply to the sending of securityholdermaterial other than proxy-related materials occurring on or after July 1, 1999. The sending of proxy-related materials for meetings held between January 1, 1999and October 1, 1999 are exempt from the proposed National Instrument so long as they are sent in accordance with NP41.
In addition, no person or company may request a NOBO list before July 1, 1999.
These changes are designed to permit participants in the securityholders material distribution process adequate time to make necessary systems or operationalchanges as appropriate to be able to comply with the proposed National Instrument.
Appendix A
Appendix A is new and contains the schedule of fees contemplated by the proposed National Instrument. As in the Draft National Instrument, the proposedNational Instrument continues to require that fees be in a reasonable amount. However, the proposed National Instrument prescribes fixed amounts of fees inBritish Columbia.
Summary of Changes to the Proposed Forms
A substantial number of changes were made to the proposed Forms in order to conform the Forms to amendments made to the proposed National Instrument.
Except as noted below, there are no substantive changes to the Forms not relating to amendments discussed in this Notice under "Summary of Changes to theProposed National Instrument". However, the requirement for manual signatures in respect of all Forms, except the form of statutory declaration, has beenremoved as part of the CSA's promotion and facilitation of the use of electronic communication.
Part 1 of Form 54-101F2 (the portion of the Request for Beneficial Ownership Information completed by the reporting issuer) has been reorganized to clarify thefive circumstances under which the request can be delivered, and the information to be contained in the request, depending on the purpose for which the requestwas made. The form also has been amended to contemplate preliminary search requests.
Item 6 of Part 2 of Form 54-101F2 has been added in connection with the changes to Part 1 concerning preliminary search requests.
Forms 54-101F6 and 54-101F7 have been amended by the addition of more detailed instructions concerning the steps to be taken by a beneficial owner thatwishes to attend a meeting and vote in person.
Form 54-101F8 now consists of a form of statutory declaration, rather than a form of undertaking.
Summary of Changes to the Proposed Companion Policy
This section describes changes made in the proposed Companion Policy from the Draft Companion Policy. For a detailed summary of the contents of the DraftCompanion Policy, reference should be made to the February Notice.
Section 2.4
Changes from the Draft Companion Policy
Section 2.4 has been amended to contain a discussion of the revised definition of intermediary, which clarifies than an intermediary having discretionary authorityover securities is considered to be a "beneficial owner" rather than an "intermediary" for the purposes of the proposed National Instrument.
Section 3.1
This section notes that the CSA recommend the use of as long a time period as possible to ensure compliance with the proposed National Instrument. Thissection also notes that it remains the responsibility of reporting issuers when planning a meeting timetable to factor in all timing considerations, includingdeadlines external to the proposed National Instrument, such as corporate law requirements and CDS requirements.
Changes from the Draft Companion Policy
The title of this section has been clarified and a discussion of the need to factor in deadlines external to the proposed National Instrument has been added.
Section 3.2
Section 3.2 notes that the fee schedule to the proposed National Instrument sets fees in a reasonable amount, or in the case of British Columbia, a fixed amount.Section 3.2 notes that the CSA consider that the fees fixed by British Columbia are reasonable, in light of current procedures and technology.
Changes from the Draft Companion Policy
Section 3.2 is new, and replaces the discussion contained in section 3.2 of the Draft Companion Policy concerning certain fee amounts considered by the CSA tobe reasonable.
Section 3.4
Subsection 3.4(1) refers to the ability of a person or company other than a reporting issuer to obtain the most current NOBO lists in the possession of thereporting issuer.
Subsection 3.4(2) discusses the ability of a person or company other than a reporting issuer to take any action that a reporting issuer may take under theproposed National Instrument, except for certain specified actions.
Changes from the Draft Companion Policy
Section 3.4 has been amended to reflect the revised approach taken in respect of the rights and associated obligations of third parties to take actions that areporting may take under the proposed National Instrument.
Section 3.5
Changes from the Draft Companion Policy
The reference in the Draft Companion Policy to a publication of the CDS fee schedule has been deleted.
Section 5.4
Section 5.4 contains the recognition of the CSA that much of the communication under the proposed National Instrument will be by electronic means, and thatthe CSA intend to promote and facilitate the use of electronic communication, subject to the current limits of both technology and applicable corporate law andsecurities legislation.
The section also indicates that the CSA are prepared to consider applications in specific circumstances to facilitate electronic communication beyond what iscurrently contemplated in the proposed National Instrument. In particular, the CSA will entertain applications for relief from the requirement contained in theCanadian securities legislation of some jurisdictions requiring the provision of written voting instructions. Furthermore, the section also indicates that manualsignatures to documents are no longer required.
Changes from the Draft Companion Policy
Section 5.4 has been expanded to emphasize the CSA views on the desirability of electronic communication and their intent to promote and facilitate its use. Inaddition, as part of their promotion of electronic communication, the CSA have removed the obligation to provide manual signatures to documents other thanstatutory declarations, believing that while the content of these documents should be prescribed, persons or companies should satisfy themselves in whatevermanner they consider appropriate as to the authenticity of the person who would otherwise be signing the document manually.
Section 6.4
The detailed application requirements contained in the Draft Companion Policy have been deleted. The procedure for making applications will be contained inNational Policy 12-201, the National Application System policy.
Section 7.1
Section 7.1 provides that the use of a NOBO list contrary to section 7.1 of the Instrument constitutes a breach of the proposed National Instrument andsecurities legislation.
Changes from Draft Companion Policy
Section 7.1 is new and was added as a result of comments received requesting clarification that the use of NOBO lists for prohibited purposes constitutes abreach of the proposed National Instrument and securities legislation.
Comments
Interested parties are invited to make written submissions with respect to the proposed National Instrument, Forms and Companion Policy. Submissions receivedby September 15, 1998 will be considered.
Submissions should be sent to all of the Canadian securities regulatory authorities listed below in care of the Ontario Commission, in duplicate, as indicatedbelow:
British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Securities Commission
The Manitoba Securities Commission
Ontario Securities Commission
Office of the Administrator, New Brunswick
Registrar of Securities, Prince Edward Island
Nova Scotia Securities Commission
Department of Government Services and Lands, Newfoundland and Labrador
Registrar of Securities, Northwest Territories
Registrar of Securities, Government of the Yukon Territory
c/o Daniel P. Iggers, Secretary
Ontario Securities Commission
20 Queen Street West
Suite 800, Box 55
Toronto, Ontario M5H 3S8
Submissions should also be addressed to the Commission des valeurs mobilières du Québec as follows:
Claude St Pierre, Secretary
Commission des valeurs mobilières du Québec
800 Victoria Square
Stock Exchange Tower
P.O. Box 246, 17th Floor
Montréal, Québec H4Z 1G3
A diskette containing the submissions (in DOS or Windows format, preferably WordPerfect) should also be submitted. As securities legislation in certainprovinces requires that a summary of the written comments received during the comment period be published, confidentiality of submissions received cannot bemaintained.
Questions may be referred to any of:
Diane Joly
Commission des valeurs mobilières du Québec
(514) 873-5326
Glenda A. Campbell
Alberta Securities Commission
(403) 297-6454
Robert Hudson
British Columbia Securities Commission
(604) 899-6691
or 1-800-373-6393 (in B.C.)
Robert F. Kohl
Ontario Securities Commission
(416) 593-8233
Rescission of National Policy Statement No. 41
NP41 is replaced by the proposed National Instrument. The text of the proposed rescission is:
"National Policy Statement No. 41 Shareholder Communication is rescinded effective upon the date proposed National Instrument 54-101 comes into force."
Text of Proposed National Instrument, Forms, Companion Policy and Implementing Rule
The text of the proposed National Instrument, Forms, Companion Policy and Implementing Rule follow, together with footnotes that are not part of the NationalInstrument, Forms, Companion Policy or Implementing Rule, as applicable, but have been included to provide background and explanation.
DATED: July 17, 1998
APPENDIX A
LIST OF COMMENTERS
ON
PROPOSED NATIONAL INSTRUMENT, FORMS AND COMPANION POLICY
1. Blain & Company
2. Canadian Investor Relations Institute
3. Canadian Society of Corporate Secretaries
4. Canadian Corporate Shareholder Services Association
5. Canadian Bankers Association
6. Canadian Depository for Securities
7. CIBC Mellon Global Securities Services Company
8. Fiducie Desjardins
9. Independent Investor Communications Corporation
10. Investment Dealers Association of Canada
11. Investors Group Financial Services Inc.
12. MacMillan Bloedel
13. Manulife Securities International Ltd.
14. Willy Rasmussen
15. Securities Law Subcommittee of the Business Law Section of the Canadian Bar Association (Ontario)
16. Security Transfer Association of Canada
17. Stikeman, Elliott
18. TD Securities Services
19. Tory, Tory, DesLauriers & Binnington
20. TransAlta Corporation
SUMMARY OF COMMENTS RECEIVED
ON
DRAFT NATIONAL INSTRUMENT 54-101, DRAFT FORMS 54-101F1,
54-101F2, 54-101F3, 54-101F4, 54-101F5,
54-101F6, 54-101F7 AND 54-101F8
AND
DRAFT POLICY 54-101CP
AND
RESPONSE OF THE CANADIAN SECURITIES ADMINISTRATORS
1. INTRODUCTION
On February 27, 1998, the Canadian Securities Administrators (the "CSA") published for comment proposed National Instrument 54-101 Communication withBeneficial Owners of Securities of a Reporting Issuer (the "National Instrument"), Forms 54-101F1, 54-101F2, 54-101F3, 54-101F4, 54-101F5, 54-101F6,54-101F7 and 54-101F8 (the "Forms"), the proposed Companion Policy 54-101CP (the "Companion Policy") and, in Ontario, the proposed Implementing Rule54-801.(3) The comment period for these materials expired on May 29, 1998.
In this Appendix, the versions of these materials published in February are called the "Draft National Instrument", the "Draft Forms" and the "Draft CompanionPolicy".
During the comment period, the CSA received 20 submissions. The commenters providing the submissions can be grouped as follows:
Mutual Fund Companies/Registrants 3
- Investors Group Financial Services Inc. ("IG")
- Manulife Securities International Ltd. ("Manulife")
- TD Securities Services ("TD Securities")
Law Firms 3
- Tory, Tory, DesLauriers & Binnington ("Tories")
- Stikeman, Elliott, on behalf of Securities Transfer Association of Canada ("Stikeman/STAC")
- Blain & Company ("Blain")
Trade Associations 6
- Canadian Bankers Association ("CBA")
- Canadian Corporate Shareholder Services Association ("CCSSA")
- Canadian Investor Relations Institute ("CIRI")
- Canadian Society of Corporate Secretaries ("CSCS")
- Security Transfer Association of Canada ("STAC")
- Securities Law Subcommittee of the Business Law Section of the Canadian Bar Association (Ontario) ("CBAO Subcommittee")
Reporting Issuers 2
- MacMillan Bloedel Limited
- TransAlta Corporation
Individual
- Mr. Willy Rasmussen 1
Self-Regulatory Organizations 1
- Investment Dealers Association of Canada ("IDA")
Financial Institutions 2
- CIBC Mellon Global Securities Services Company ("CIBC Mellon")
- Fiducie Desjardins ("Desjardins")
Others 2
- Canadian Depository for Securities Inc. ("CDS")
- ADP Independent Investor Communications Corporation ("IICC"), whose comment adopted a letter of Stikeman, Elliott ("Stikeman/IICC")
TOTAL 20
Copies of the comment letters may be viewed at the office of Micromedia, 20 Victoria Street, Toronto, Ontario (416) 312-5211 or (800) 387-2689.
The CSA have considered the comments received and thank all commenters for providing their comments on the Draft National Instrument, Draft Forms andDraft Policy. The Draft National Instrument, Draft Forms and Draft Policy have been amended to reflect a number of the comments, and are being republishedfor further comment.
The following is a summary of the comments received, together with the CSA's responses and, where applicable, the proposed changes in response to thecomments. The republished versions of these instruments are called the "proposed National Instrument", the "proposed Forms" and "proposed Policy" in thisAppendix. Terms used in this summary that are defined in the proposed National Instrument have the meanings ascribed to them in that Instrument.
The CSA received a number of helpful drafting comments on the Draft National Instrument. Those comments that are purely technical or designed to improvethe clarity of the instruments are not summarized in this Appendix.
2. GENERAL COMMENTS
The comments received on the Draft National Instrument were varied and mixed, ranging from those that expressed general approval of the approach proposedin the Draft National Instrument, to comments that suggested that the proposed approach was fundamentally misguided and unnecessary. Virtually allcommenters acknowledged that some amendments to NP41 were appropriate, and that some of the proposals contained in the Draft National Instrument wereuseful. However, a number of commenters argued that NP41 were basically working well, that no major amendments to it were appropriate and that the changesproposed in the Draft National Instrument would create complexity, confusions, inefficiency and higher costs for market participants.
Certain commenters, including STAC, the CCSSA, CIRI, the CSCS and an issuer, strongly supported the proposals for reform in the Draft National Instrumentand felt that they positively addressed the deficiencies that exist under NP41. The CCSSA stated that its position on NP41 "has the support of the entire issuercommunity from the smallest junior resource company to those as large as BCE Inc."
Permitting Reporting Issuers to Send Materials Directly to NOBOs
Objections to Proposal
The most controversial aspect of the Draft National Instrument, as evidenced by the comments received, was the proposal to permit reporting issuers to deliversecurityholder documents directly to NOBOs of their securities. The most strenuous objections in this regard were raised in respect of proxy-related materials.The commenters that objected to this proposal felt that the proposal ran the risk of creating significant inefficiencies for those parties involved in the process ofdistributing securityholder materials.
CIBC Mellon, IICC, TD Securities, STAC and the CBA recognized the CSA's efforts to provide reporting issuers with a more cost effective method ofshareholder communication, but expressed concern that the proposed changes will instead result in significantly increased costs, specifically for intermediariesand reporting issuers. It was argued that these costs will be the result of the requirement to maintain multiple infrastructures to support communication toinvestors through two alternative approaches (indirectly through intermediaries and directly through issuers) rather than the one approach used under NP41(indirectly through intermediaries). Some commenters felt that permitting two approaches to the distribution of securityholder materials constituted a"fragmentation" of the distribution process that would lead to inefficiencies of the system in a area where standardization and high volume should be encouraged.
The CBA argued that the ability of a reporting issuer to elect in connection with a distribution of materials whether it would mail directly to NOBOs would meanthat the issuer could in one year distribute directly and distribute the next year only through intermediaries. This would create a "seesaw" effect that would beinefficient and materially impact intermediaries.
The argument of several of commenters, such as the IDA and the CBA, was that the existing shareholder communication process is operating efficiently andshould not be changed. They argued that the process to revise NP41 was commenced at a time when the existing procedures were thought to be inefficient.However, they suggested that the situation has changed dramatically with the evolution of technology and the refinement of delivery systems and channels. Thisis evidenced by the decreasing number of complaints received by the IDA and the members of the CBA from clients concerning the non-receipt of requestedmaterial, so much so that these complaints are now virtually non-existent. The IDA stated that most large reporting issuers and IDA members, who represent alarge segment of the intermediary group, believe the existing system is working well and need not be amended in any significant way.
In addition, IICC argued that changes to the system will lead to confusion and failure and that incentives to utilize technologic innovation (such as telephone andInternet voting) to lower issuers' costs, which are encouraged by the present system, will be lost.
IICC also expressed concern that regulators will experience increased administration and associated expenses to oversee and regulate this new, complex process.In particular, the securities commissions will be required to monitor compliance by issuers who opt to carry out the mailing and voting process themselves, a taskmuch more difficult than simply focusing on the present standardized method of proxy distribution and processing used by all issuers.
The CSA note that virtually all commenters supported the right of reporting issuers to obtain lists of their NOBOs. In particular, TD Securities and the IDAexpressed their agreement with the proposal by the CSA that reporting issuers be permitted access to NOBO lists. However, IICC and the IDA commented thatthey fully supported the ability of reporting issuers to obtain NOBO lists for all legitimate purposes other than proxy communication. IICC argued that the use ofNOBO lists for proxy mailings will potentially compromise the integrity of the mailing, tabulation and vote process. However, system changes necessary togenerate a NOBO list (apart from the proxy distribution process) are minimal, according to the IDA, and consequently, the IDA recommended that the CSAproceed with this proposal.
IICC also pointed out that while it is argued that greater transparency of ownership can be achieved with the provision of NOBO lists, the reality is that issuerswant to know who their large owners are, and these owners will typically be OBOs. To answer the argument that permitting direct proxy solicitation providescompetition which should lead to a cheaper, more efficient system, the IDA pointed out that the price of the service in Canada currently is very nearly the sameas the U.S., which, the IDA suggested, is surprising given the economies of scale in the U.S.
Support of Proposal
The commenters that supported the approach taken in the Draft National Instrument emphasized the importance of the ability of reporting issuers to identify andcommunicate with the beneficial owners of their securities. These commenters, including CIRI, believed that the Draft National Instrument would provide issuerswith more flexibility in controlling costs and enable them to more efficiently identify their securityholders.
The CCSSA conducted a survey of approximately 30 issuers, and reported to the CSA that the issuers who responded unanimously want to be able to accesstheir NOBO list so they may control the proxy mailing, tabulation and solicitation and use the list for any other purpose. The CCSSA also reported that the"overwhelming majority of respondents" said they would use their NOBO list to control the proxy procedure and would not be satisfied if they could not usetheir lists for that purpose.
Response
The CSA believe that, as a matter of principle, it is important that issuers have access to information on their beneficial owners and the ability to communicatedirectly with their non-objecting beneficial owners. These rights parallel the rights of a reporting issuer under corporate legislation with respect to registeredholders, and the CSA are attempting, to the extent possible and practicable, to put beneficial owners in the same position as registered holders of securities.
The CSA recognize the expressed concerns over efficiency, but believe the rights of reporting issuers are sufficiently important enough to mitigate theseconcerns. The CSA also expect that programming and information systems and operations in this area will continue to evolve in order to deal with theseefficiency concerns.
Comments relating to Fees
Reasonable Fees
A number of commenters, including Desjardins and Stikeman/IICC raised concerns regarding the fact that fee provisions in the Draft National Instrument simplyrequire the payment of a fee in a "reasonable amount".
Response
The approach in the proposed National Instrument has been amended slightly to provide for prescribed fees in British Columbia, and for reasonable fees in otherjurisdictions. Section 3.2 of the proposed Companion Policy states the view of the CSA that it considers the fees prescribed in British Columbia to be reasonablefees.
Provision for Start-up Fees
Stikeman/IICC noted that the Draft National Instrument makes no provision for first-time start-up fees to cover the programming and other costs ofimplementing procedures to provide beneficial owner information and NOBO lists. IICC argued that "there is no experience in Canada on which appropriate feescan be determined." The IDA, Desjardins and IICC also argued that the ability of intermediaries to negotiate fees and expenses, as they believed is contemplatedunder the Draft National Instrument, will create confrontation, abuse and administrative delays. IICC stated that issuers have benefited by the fixed fees of IICCas inflation has devalued the dollar in real terms since 1987. Stikeman/IICC pointed out that this is a departure from the fixed rate regulated price environmentfor non-registered shareholder communications whereby the many small reporting issuers in Canada have been subsidized by the few large issuers.
Response
The CSA are confident that the changes necessary to implement the system contemplated by the proposed National Instrument will not be so significant as tolead to substantial first-time start-up costs.
Fees Borne by Intermediaries
STAC was the only commenter who urged that all fees applicable to such things as beneficial shareholder searches, data transmissions and the provision ofNOBO lists should be borne by intermediaries. STAC stated that "this approach would be consistent with the normal business practice of matching expenses torevenues since it is the intermediaries who generate the revenue from the existence of beneficial shareholder accounts."
Response
The CSA are satisfied that the fee regime contained in the proposed National Instrument represents a fair allocation of costs having regard to the competinginterests represented in the process, and have not adopted the STAC comment.
Confidentiality Issues
Confidentiality Issues Associated with OBOs
Some commenters objected to the principle behind the Draft National Instrument that OBOs should bear the costs of remaining anonymous. Stikeman/IICCstated that "the assumption under New NP41 that OBOs will be responsible for the cost of remaining anonymous (if issuers send directly to NOBOs) is far frombeing a consensus view". In addition, the CBA and CIBC Mellon argued that OBOs would be adversely affected as a result of being charged directly withmailing costs depending on the method of mailing chosen by the reporting issuer.
The CCSSA expressed uncertainty whether OBOs should be penalized for wishing to remain anonymous, and the CBAO Subcommittee stated that securitieslegislation provides the right of anonymity to shareholders. The CCSSA therefore raised concerns about the requirement in the Draft National Instrument whichmakes OBOs pay for this right and the CBAO Subcommittee suggested deleting this requirement in its entirety.
The CBA argued that this principle departs from one of the principles articulated in section 1.2 of the Draft Companion Policy that registered and non-registeredshareholders are to be treated equally. The IDA argued that the cost of communicating with an OBO in the current system is no more than the cost ofcommunicating with a NOBO and therefore could not see the justification for the transfer of this cost to the OBO.
CIBC Mellon felt that this principle would be contradicted by requiring each OBO client to support an additional administrative function required to track andverify their receipt of the materials mailed by the intermediary.
The CCSSA suggested that in the "interests of equitable allocation of obligations under the National Instrument, the intermediaries should be required to paythese costs". However, the CCSSA stated that as this appears to be precluded by section 49 of the Securities Act (Ontario), at the very least, the intermediariesshould be entitled to recover the reasonable costs and section 49 should be referenced.
The CBA and the CBAO Subcommittee expressed concern about the process of collecting the fees from OBOs who are charged directly with mailing costs forsecurityholder materials sent to them. The CBA stated that the collection responsibility apparently rests with the intermediary but there are no rules stipulatingwhat would occur in the event that the OBO fails to remit the fee.
STAC supported the principle of OBOs bearing the costs of confidentiality, arguing that if OBOs were no longer required to pay the costs associated withremaining anonymous, more beneficial shareholders would likely choose to become OBOs, "which could seriously impact an issuer's ability to identify itsbeneficial shareholders".
The CSA note that one commenter, IG, took the position that the Draft National Instrument did not go far enough in permitting a reporting issuer to gain accessto shareholder information if the beneficial owner does not wish that information to be revealed. IG suggested that while the Draft National Instrument certainlyexpands the ability of a reporting issuer to obtain more detailed information concerning beneficial owners, it still allows a shareholder to maintain confidentialityat the discretion of the shareholder. IG would prefer to see the ability to maintain this confidentiality removed, thereby permitting reporting issuers access to allshareholder information it requires in order to fulfil its own mandatory reporting obligations.
Response
The CSA continue to believe that the costs of confidentiality should properly be borne by OBOs. The CSA are of the view that the holding of securities byintermediaries and the requests for confidentiality increase communication costs throughout the system significantly and therefore should be paid by those partiesthat benefit from this structure of holding. Those costs must be borne by someone, and it is not appropriate that reporting issuers bear those costs. If a clientdetermines that it will hold securities indirectly and not identify itself, it must be prepared to pay the costs associated with remaining anonymous. Furthermore,those OBOs that are troubled by the costs of remaining anonymous have the option of identifying themselves. Moreover, it will be a matter of business relationsbetween OBOs and the intermediaries of which they are clients whether the intermediaries directly charge OBOs for those costs or whether those costs areabsorbed by the intermediaries directly.
The CSA note that some amendments have been made to the fee structures contained in the proposed National Instrument from the Draft National Instrument.The CSA have determined that OBOs should be responsible for the costs associated with the delivery of materials to them in all circumstances except, subject tosecurities legislation, when materials that have been declined by the OBOs are sent. This replaces the approach contained in the Draft National Instrument inwhich reporting issuers would bear the costs associated with the sending of materials to OBOs if the reporting issuer chose to send materials to NOBOs directly.The CSA are of the view that the revised approach is simpler, more consistent with the approach taken in NP41 and better recognizes that securities legislation ina number of jurisdictions allocates to the client any costs related to the sending of securityholder materials by intermediaries.
The CSA also note that beneficial owners of securities are OBOs only if they have taken the positive step of objecting to disclosure of their identity. Beneficialowners cannot inadvertently become OBOs, either under the proposed National Instrument or under NP41.
In response to the comment from IG, the CSA believe that is appropriate to permit a choice to remain anonymous provided that beneficial owner bears the costthat anonymity provides.
Confidentiality Issues Associated with Intermediaries
Section 4.4 of the Draft Companion Policy states that Form 54-101F6, dealing with requests for voting instructions from NOBOS, requires the identification ofthe intermediary and the shareholdings to enable the reporting issuer to reconcile voting instructions received from NOBOs and proxies. Stikeman/IICC pointedout that this means that reporting issuers will have access to all intermediary NOBO lists, even when one intermediary holds through another intermediary. Theyhave suggested that if NOBO lists were by proximate intermediary, it would still seem possible to keep confidential the identity of clients of intermediariesholding through other intermediaries without affecting the vote reconciliation process. Stikeman/IICC observed that the loss of confidentiality on the part ofintermediaries that are not proximate intermediaries, without off-setting benefits, is presumably an unintended consequence of the Draft National Instrument.
Response
The CSA generally agrees with this comment and has amended the proposed National Instrument to include subsection 6.1(4), which ensures that NOBO listswill be provided without FINS numbers unless the NOBO lists are being used in connection with the delivery of proxy-related materials to NOBOs and thereporting issuer will seek voting instructions from the NOBOs.
Electronic Distribution and Communication
A substantial number of commenters felt that the Draft National Instrument required clarification or amendment to ensure that the process that would beestablished under the Instrument would permit and facilitate the use of electronic delivery of the communications and materials contemplated by the Instrumentand in connection with the submission of proxy votes electronically. The commenters generally believed that electronic delivery of these matters would result ingeneral improvement in the efficiency of the system over time.
CDS stated that it would appreciate confirmation that nothing in the Draft National Instrument, Draft Forms or Policy would restrict its ability to implement asystem of "straight through" (i.e. automated and electronic) processing of communications with reporting issuers and intermediaries, which relies exclusively onspecific modes of electronic communication.
Response
The CSA agree with the comments and have made a number of changes to the proposed National Instrument and proposed Companion Policy to facilitateelectronic communication and transmission of materials.
Specifically, the CSA have amended the proposed National Instrument in order that all references regarding the delivery of materials consistently refer to the"sending" of materials. The definition of "send" in the proposed National Instrument includes, with the consent of the recipient, sending by electronic means andso, under the proposed National Instrument, materials may be sent electronically with the consent of the recipient. It is noted that the CSA are consideringgeneral issues relating to electronic transmission of documents. The CSA expect that the general approach to be taken will be that documents may be transmittedelectronically only with the consent of the recipient, and the proposed National Instrument has been prepared to reflect this general approach. The CSA initiativein this area may provide guidance or establish rules concerning consents, which may be made applicable to documents sent electronically under the proposedNational Instrument.
The CSA have also eliminated the references contained in the Draft National Instrument to "requests for written voting instructions", in part due to a commentby STAC that the Draft National Instrument be amended to permit electronic proxy tabulation. The proposed National Instrument now makes reference only to"requests for voting instructions" in order to permit the use of electronic means to send and receive voting instructions, subject to existing requirements of anyother applicable law, including section 49 of the Securities Act (Ontario).
Generally speaking, the CSA expect that most communication for the purposes of the proposed National Instrument will be in electronic format, except the formof statutory declaration that is required to be given with a request for beneficial ownership information, which requires a manual signature and the signature ofthe person before whom the statutory declaration is taken. The CSA are of the view that electronic systems for delivery and authentication of digital signaturesare still at preliminary stages of technology although applications for exemption from this requirement may be made in appropriate cases.
Comment relating to Ability of Beneficial Owners to Attend Meetings
Stikeman, on behalf of STAC, argued that the current provisions of the Draft National Instrument concerning voting in person by beneficial owners raise somelegal and procedural concerns and fail to achieve one of the expressly stated fundamental objectives of the Draft National Instrument contained in section 1.2 ofthe Draft Policy, namely the equal treatment of registered or beneficial owners of securities. Stikeman submitted that "this equality of treatment should expresslyextend to voting rights." Stikeman argued that under the Draft National Instrument, "beneficial owners are not treated the same as registered holders...to theextent that beneficial owners must take additional steps to enforce their right to vote in person at meetings."
Stikeman argued that in order to vote in person, a beneficial owner must either demand and obtain a form of proxy from a proximate intermediary under section8.2 of the Draft National Instrument or present a form of request for voting instructions at the meeting, procedures which registered holders are not required tofollow.
In order to deal with this perceived problem, Stikeman proposed an alternative approach to the proxy mechanism proposed in the Draft National Instrument andcurrently in practice under NP41. The major steps in the proposal are as follows:
1. In connection with each meeting, each depository would provide to a reporting issuer an omnibus power of attorney delegating the depository's votingauthority to each participant on whose behalf, and to the extent that, the depository holds securities that carry the right to vote at the meeting.
2. Each intermediary would be required to file with each reporting issuer (or its agent, such as its registrar and transfer agent), in respect of the securities ofwhich it beneficially holds, from time to time, an omnibus power of attorney sub-delegating the voting power delegated to them under the depository omnibuspower of attorney to each beneficial owner on whose behalf, and to the extent that, such intermediary holds securities from time to time.
The proposed intermediary power of attorney, when deposited with an agent of a reporting issuer would operate as a blanket standing power of attorney inrespect of all meetings of all issuers, the securities of which such intermediaries hold on behalf of beneficial owners, from time to time.
3. (i) Canadian-resident NOBOs and NOBOs to whom reporting issuers may legally deliver proxy-related materials would receive an issuer proxy (coded toidentify the relevant intermediary) in the same manner as registered holders. Pursuant to the omnibus power of attorney, these direct-voting NOBOs would haveall of the voting rights of, and could appoint and revoke their proxy, or attend or vote in person at a meeting on the same basis as, registered holders; and
(ii) U.S.-resident NOBOs, and other NOBOs to whom reporting issuers may not legally deliver proxy-related materials, and OBOs would continue to receive arequest for voting instructions. If such indirect-voting NOBOs wished to attend or vote in person at a meeting, they would have to request a form of legal proxyfrom the relevant intermediary and present the form at the meeting in order to be eligible to vote in person.
4. Where a reporting issuer elected to have proxy-related materials delivered to NOBOs indirectly through intermediaries, all NOBOs and OBOs would besubject to the procedure outlined in item 3(i) above and, in order to attend a meeting or vote in person, they would have to request a form of legal proxy fromthe relevant intermediary and present the form at the meeting in order to be eligible to vote in person.
Stikeman recommended that the obtaining of NOBO lists be made mandatory in connection with each meeting to facilitate this system.
Response
The CSA appreciate the suggestions made by Stikeman and STAC and recognize the considerable effort that went into their preparation. The CSA consideredthe proposal and spoke with some industry participants to better understand the process now available for beneficial owners to take steps to attend and vote atmeetings. The CSA are satisfied that the existing mechanisms are working satisfactorily and have elected not to implement the Stikeman/STAC proposal at thistime. The CSA also wish to ensure that the changes to existing systems required by the implementation to the proposed National Instrument are as manageableas possible for industry participants, and considered this issue in deciding not to implement the Stikeman/STAC proposal at this time. In addition, the proposalwould result in it being necessary for reporting issuers to incur the costs of obtaining NOBO lists in connection with every meeting and the CSA do not proposeto mandate the delivery of NOBO lists by proximate intermediaries or their use by reporting issuers.
Stikeman helpfully provided a detailed outline of the amendments to the Draft National Instrument and Draft Forms that would be required to implement itsproposal. As the CSA is not implementing the proposal at this time, this Appendix does not describe the detailed proposed amendments.
Regulatory Compliance and Integrity of the System
Some commenters expressed concern that failures by a reporting issuer to properly mail materials directly to NOBOs would cause difficulties for others involvedin the distribution process.
CIBC Mellon stated that if material is not mailed in accordance with the Draft National Instrument, CIBC Mellon would have a contractual obligation to allclients to obtain another copy of the material and deliver the replacement material within tight time frames. CIBC Mellon stated that the client would not carewho mailed the material, but would simply want their materials promptly. The IDA agreed, stating that complaints from clients regarding the failure to receivematerials must be dealt with by the intermediary.
Stikeman/IICC also expressed concern regarding how regulatory compliance will be ensured when reporting issuers send materials directly to the NOBOs.
IICC stated that communication with beneficial shareholders under the proposed regime would, from a practical point of view for an investor, remain theresponsibility of the intermediary. IICC was of the opinion that concerns created by an issuer's direct communication with a beneficial shareholder (or the absenceof communication) would most likely be reported by a shareholder to the intermediary with whom the shareholder has an advisory relationship and maintainstelephone contact.
TD Securities submitted that the NP41 system reduces the likelihood of inappropriate behaviour of reporting issuers.
The CBA suggested that, because of the concerns over the ability of a reporting issuer to properly deliver materials to NOBOs, it is necessary to specify that anintermediary is not responsible for the non-delivery of materials to NOBOs if a reporting issuer has elected to distribute the materials directly. The CBA stressedthat some specific relief from the fiduciary obligation to provide the materials to the securityholders must be given to intermediaries. The CBA also noted that anindemnity may also be appropriate.
Response
The CSA are of the view that the system will operate in substantially the same manner as in the past and do not anticipate significant changes. The CSA believethat concerns over the inability of reporting issuers to satisfy their obligations under the proposed National Instrument expressed in some of the comments aresomewhat exaggerated. The CSA expect that many reporting issuers will, in any event, use as their agents to distribute materials some of the same serviceproviders that currently distribute materials on behalf of intermediaries, and that those service providers will be as efficient in distributing the materials on behalfof reporting issuers as they have been on behalf of intermediaries.
Over-voting Issues
Securities Lending
A number of commenters, including the CCSSA, the CBA, CIBC Mellon and Stikeman/IICC noted that the Draft National Instrument did not address the legalissue as to who, as between a borrower or lender of securities, is entitled to vote. It was urged that the Draft National Instrument address this issue in order toreduce some of the problems now experienced in connection with over-voting at meetings. Some of these commenters suggested that the proxy revert to thelender and not to the borrower.
Response
The CSA believe that the issue of who votes the securities that are subject to a securities lending arrangement is a contractual matter between the borrower orlender and beyond the scope of the proposed National Instrument.
Transfers of Securities
Paragraph 8.2(b) of the Draft National Instrument stated that nothing in that Instrument shall be interpreted to restrict in any way the right of a depository orintermediary to vary an omnibus proxy in respect of securities to reflect a change in the registered or beneficial ownership of the securities. Stikeman/IICCsuggested that the taking of steps by a transferee contemplated by corporate law to be recognized as a securityholder often cause over-voting.
Response
The referenced paragraph does not create any new rights or obligations; it simply clarifies that nothing in the Draft National Instrument will take away any ofthose rights or obligations existing under other law. This paragraph has not been amended. The CSA consider the over-voting issue an issue that is separate fromand beyond the scope of the proposed National Instrument.
Duplicates
CIBC Mellon pointed out that the Draft National Instrument does not currently contemplate the administration of duplicate and multiple accounts in the system.STAC suggested that one possible solution to deal with the issue of duplicate mailings for investors who have accounts with more than one intermediary couldbe that the beneficial shareholder mailings contain a notice that no attempt has been made to eliminate these duplicate mailings.
Response
The CSA are of the view that the proposed National Instrument does not prohibit issuers from following the suggestion of the commenter and accordingly, nospecific authority is necessary.
3. RESPONSES TO SPECIFIC QUESTIONS
In the February 1998 Notice accompanying the Draft National Instrument, the CSA requested specific comment on nine issues. The comments requested and theresponses received are discussed below.
Issue 1 - Timing Requirements
The CSA noted that the timing requirements of NP41 have been amended in the Draft National Instrument to reflect a requirement that materials be sent tobeneficial owners no later than 21 days before a meeting and to reduce the minimum time periods for conducting intermediary searches before the record date.The CSA requested comment on the appropriateness of the timing requirements.
The comments received on this issue varied greatly. Some commenters suggested that the timing requirements were acceptable, while a number of commentersexpressed concern that the reduced time periods were either too short or too long.
Specifically, one issuer and CIRI indicated that the reduced time periods are acceptable.
STAC pointed out that the Draft National Instrument requires issuers to provide notice of meeting at least 8 days before the record date period and that thisreduced time frame may conflict with the CDS procedure for meeting publication services. Generally, CDS was of the view that the timing requirementscontained in the Draft National Instrument were feasible and did not present a problem for them.
Desjardins and the IDA stated that the time periods proposed in the Draft National Instrument are too short and strongly urged that the longer timingrequirements in NP41 should be retained. The IDA argued that the changes will make timely delivery to shareholders more difficult and shareholders will begiven less time to review and consider the materials.
Stikeman/IICC stated that despite the statement in subsection 3.1(1) of the Draft Companion Policy that "it is useful for reporting issuers to take these steps atearlier times to ensure sufficient time for the search procedures to be completed", intermediaries should probably count on the minimum time periods fromreporting issuers, as it is unlikely that reporting issuers will follow this suggestion in the Draft Companion Policy. The CCSSA recommended that this suggestionbe given far greater prominence and perhaps should be included in the Draft National Instrument itself.
Tories, Manulife Securities and IG stated that the minimum time periods required to hold a meeting of shareholders in the Draft National Instrument is now 35days plus 8 business days, arguing that this time period is too long. Those comments stated this time period is in excess of what was permitted under NP41 whichallowed issuers to condense the 60 days to 35 days for an urgent meeting. Tories, Manulife Securities and IG argued that this shorter minimum time period underNP41 should be carried forward to the Draft National Instrument. In addition, IG suggested that the calling of meeting process continues to be cumbersome andlengthy. A solution to this problem would be to provide for a minimum 21 day period prescribed under the Canada Business Corporations Act in the case ofmeetings at which non-contentious matters are to be dealt with, and in the case of meetings at which more contentious matters will be dealt with, provide for aminimum 35 day period.
Response
The CSA have amended the timing provisions from those contained in the Draft National Instrument by deleting the timing requirements in sections 2.2 and 2.5.This will permit reporting issuers to call meetings on a more expedited basis than under the Draft National Instrument.
With respect to the general point relating to the compression of the time periods, the CSA note that the time periods now contained in the proposed NationalInstrument are substantially the same as the minimum time periods provided for in NP41 under the automatic waiver provision of Part XII of NP41. As stated inthe February Notice and in section 3.1 of the proposed Companion Policy, the CSA emphasize that these are minimum time periods only and that reportingissuers should allow as much time as required to ensure that all steps in the process are properly carried out and that all time requirements to which an issuer maybe subject are taken into account.
Issue 2 - Use of Procedures for Non-proxy-related Materials
The CSA requested comment on whether the use of procedures set out in the Draft National Instrument for the sending of proxy-related materials to beneficialowners should be mandatory for reporting issuers in respect of non-proxy-related materials and if so, in what circumstances. Under the Draft NationalInstrument, section 2.8 provides that a reporting issuer may, but is not required to, use these procedures for securityholder materials other than proxy-relatedmaterials.
Differing views were expressed on this issue.
CIRI strongly suggested that the procedures not be mandatory for non-proxy-related material so that "issuers are not forced into expensive and time-consumingsearch procedures". The CBAO Subcommittee also argued that it would be "unduly burdensome" to mandatorily extend the procedures.
An issuer expressed the view that the Draft National Instrument should be used only if there is a security law or corporate law requirement to send material tobeneficial holders.
On the other hand, STAC argued that the beneficial shareholder communication procedures should also be applicable to all communications required byregulation for registered shareholders. STAC felt that this would be in keeping with one of the stated principles contained in section 1.2 of the Draft CompanionPolicy, which is to ensure that "all securityholders of a reporting issuer, whether registered holders or beneficial owners, should have the opportunity to betreated alike as far as is practicable." CDS was in favour of extending the communication procedures to include other securityholder materials, as there are otherimportant materials distributed by reporting issuers, provided these reporting issuers pay their appropriate share of the associated costs.
The CBA and IICC strongly encouraged the CSA to require issuers to use the Draft National Instrument in connection with the distribution of non-proxy-relatedmaterials. IICC suggested that issuers should be required to use the system for capital events including take-over bids, rights offerings, and others. IICCmaintained that the current system, when used by issuers for these purposes, has proven to be effective.
Response
After considering the comments, the CSA have decided not to make the distribution of non-proxy-related materials by a reporting issuer under the proposedNational Instrument mandatory. The CSA encourage the use of the regime established under the proposed National Instrument, but do not feel it is appropriateto make the use of that regime mandatory at this time for all distributions given the general lack of consensus on the point and the desire not to hold up theimplementation of this Instrument.
Issue 3 - Use of Procedures by Persons or Companies other than Reporting Issuers
The CSA requested comment on whether the use of the procedures to deliver securityholder materials contained in the Draft National Instrument by parties otherthan reporting issuers should be mandatory and if so, for what distributions of materials and in what circumstances.
The majority of commenters stated that third parties should also comply with the Draft National Instrument. In IG's view, the rationale for compliance is thatthird parties have the benefit of obtaining all the information that a reporting issuer can obtain and therefore should also be obliged to comply with the process.Similarly, STAC maintained that third parties should be bound as this would be in keeping with the "spirit of equality expressed in the Instrument". In addition,CDS stated that parties would benefit from the extension of the scope of the Draft National Instrument as a result of the roles and responsibilities of each party.
An issuer suggested that if a third person "has a legitimate reason to communicate with beneficial holders about an issuer then the procedures should be used."
IICC suggested that third parties be required to use the Draft National Instrument in the circumstances of a distribution of non-proxy-related materials for capitalevents including such events as take-over bids and rights offerings.
An issuer and the CBAO Subcommittee disagreed with the majority of commenters, stating that it is important to protect the right of the beneficial shareholderto receive material relating to an issuer, but not in other situations. The CBAO Subcommittee argued that to require outside parties to adhere to this processwould be difficult to enforce and create needless complexities.
CIRI asked that the CSA specify that NOBO lists can be used by persons other than reporting issuers only for proxy-related matters.
Response
As with the previous issue relating to the use of the regime by reporting issuers for non-proxy-related material, the CSA have determined not to make the use ofthe regime mandatory for non-reporting issuers at this time, given the general lack of consensus on the point and the desire not to hold up the implementation ofthis Instrument.
Issue 4 - Sending of Materials to All Beneficial Owners
Sections 2.10 and 4.3 of the Draft National Instrument would have prohibited the delivery of routine proxy-related materials to beneficial owners who havechosen, or been considered to have elected, not to receive such materials. The CSA requested comment on whether the existing ability in NP41 of a reportingissuer to override a beneficial owner's waiver of the right to receive those materials is appropriate.
An issuer simply stated that an override provision should not exist as respect should be given to a NOBO's instruction that the material not be sent.
The CBAO Subcommittee, CIRI, STAC and the CCSSA however, took the position that issuers should have the right to override the holder's election. STACargued that this right should exist in circumstances such as where the consideration of certain matters at a meeting or when financial statements showing asufficiently radical change are, in the opinion of an issuer, material enough that all shareholders should be aware of them and be empowered to take action.STAC did suggest that in such circumstances, an issuer should be required to include an explanation of its decision to override the waiver. An issuer argued thatan issuer should retain the right to override because the beneficial owners may not realize that they have, by default, not "elected" to receive routineproxy-related materials. This issuer stated that if subsection 3.7(2) of the Draft National Instrument is modified (as discussed under Issue 5 below) then an issuershould not have the ability to override a beneficial owner's waiver.
Response
The CSA have reconsidered the issue and are now proposing to return to the approach taken in NP41 whereby an issuer may override the election of a beneficialowner not to receive certain materials. However, the proposed National Instrument provides that a reporting issuer may take this step only if it bears the cost ofdistributing those materials.
Issue 5 - Decline of Receipt of Routine Materials
The CSA requested comment on whether beneficial owners should have the ability to waive the receipt of proxy-related materials for meetings at which onlyroutine business is conducted. The CSA also requested comment on whether the definition of "routine business" contained in the Draft National Instrumentshould be expanded or reduced.
One issuer commented that there is no point printing materials if they will be thrown away by the recipient. The CCSSA also pointed out that some issuers donot want to incur the significant extra costs of sending materials concerning housekeeping items to all shareholders. As a result, both the issuer and CCSSArecommended that if a beneficial holder does not want materials, he or she should be allowed to waive them.
Another issuer agreed that individuals should have the right to waive receipt of materials. However, this issuer was of the opinion that if an intermediary does notreceive instructions from the beneficial owner, the beneficial owner should be considered to have chosen to receive all materials, contrary to what is presently setout under subsection 3.7(2) of the Draft National Instrument. This issuer believed that this would ensure that beneficial shareholders that do not wish to receivematerials are forced to take action in order not to receive materials.
The CBAO Subcommittee recommended that the current provisions of NP41 should be continued. The CBAO Subcommittee stated that if individual beneficialowners are allowed to prohibit the delivery of routine proxy-related material, this would add an unnecessary burden on the reporting issuer and the intermediary,including having to determine which materials are "routine" and which are not and the additional costs to reporting issuers to maintain different sets of mailinglists. The CBAO Subcommittee argued that it is more cost efficient for reporting issuers to mail proxy-related materials to all their beneficial shareholders andthat the beneficial owner can simply choose not to read the mailing.
The views on what should be continued in the definition of "routine business" varied widely among commenters. For example, Stikeman/IICC and the CBAOSubcommittee believed that the proposed definition currently includes meetings for the election of directors and would prove overly broad in circumstanceswhere there is a contest as to the composition of the board of directors.
An issuer and the CBA believed that the definition should be expanded. The rationale for the CBA's position was that routine meetings within the meaning of theDraft National Instrument are increasingly less common and submitted that this would result in increased distribution obligations for reporting issuers.
STAC provided specific suggestions to modify the definition of "routine business". STAC suggested that in clause (d) of the definition reference should be madeto the "incumbent" auditor of the reporting issuer. The CCSSA also suggested that reference be made to the "re-appointment of the incumbent auditor". As aresult of either of these changes, a change in auditor would not, according to STAC, be routine.
STAC suggested that it would be appropriate to add to the list the approval of stock options required for Vancouver Stock Exchange companies. Accordingly,STAC suggested the inclusion of a clause (e) as follows:
(e) for reporting issuers incorporated under the Laws of the Province of British Columbia, whose shares are listed only on the Vancouver Stock Exchange, theauthorization of the Directors to grant Director, Senior Officer and Insider Stock Options and to amend and to exercise such options within the Policy limitationsof the Vancouver Stock Exchange.
Blain pointed out that some corporate statutes deem the fixing of the number of directors to be special business and requested clarification as to whether thesetting of the number of directors to be elected should be treated as routine business or not. Blain stated that under the Draft National Instrument, corporationscould be required to distribute meeting materials to shareholders who do not want to receive "routine" materials where the only matter that is "special" is theselection of number of directors to be elected. Blain suggested that the definition be expanded by the inclusion of the following provision:
(c) setting or changing the number of directors to be elected within a range permitted under corporate law where no change in the reporting issuer's constatingdocuments is required in order to permit such setting or such change in the number of directors to be elected.
Response
The CSA have determined to continue with the approach contained in the Draft National Instrument under which materials relating to a meeting at which onlyroutine business is to be conducted may be declined by beneficial owners. This continuation is subject to the ability of a reporting issuer to override this electionat its own expense. The CSA have also elected to retain the "default" approach with respect to a beneficial owner's election to decline documents (whereby abeneficial owner is deemed to decline to receive routine documents if he or she does not provide instructions on the matter) which is consistent with NP41.
This CSA have amended the definition of "routine business" in response to a number of the comments.
Paragraph (d) has been added to include a vote by securityholders to set or change the number of directors to be elected within a range permitted by corporatelaw, in the manner suggested by the Blain comment.
Paragraph (e) has been amended to restrict the paragraph to reappointment of an incumbent auditor, rather than the appointment of an auditor.
The CSA are not adopting the STAC comment concerning stock options, as the CSA do not believe that stock option matters required to be put before theshareholders should be assumed to be routine. Accordingly, the CSA are not prepared to treat any aspects of the provision of stock options as "routine business"for these purposes.
Issue 6 - Third Party NOBO Lists
The CSA requested comment on whether a reporting issuer that receives a request from another person or company for a NOBO list should be required toperform an intermediary search to request a new NOBO list or whether the reporting issuer should be allowed to provide the most recent NOBO list in itspossession.
An issuer and CIRI commented that an issuer should be allowed to provide a copy of the most recent NOBO list in its possession. This issuer qualified itsstatement by recommending that this NOBO list should not be older than six months. This issuer raised the question of who should pay the cost of generating anew NOBO list. The comments of CIRI, the CCSSA and STAC contained a response to this question, suggesting that all costs associated with providing the listshould be payable by the party who has requested the list from an issuer.
The CCSSA and STAC believed that the reporting issuer should initiate the procedures to prepare a new list; however, the CCSSA suggested that considerationbe given to the imposition of parameters for the effective date of a NOBO list. The CBAO Subcommittee requested that the CSA consider an exemption fromthe requirement for a reporting issuer to provide a new NOBO list to a third party if there has been a recent (perhaps within the last 30 days) contested meetingfor which a NOBO list was prepared. However, the CBAO Subcommittee went on to state that should the party be prepared to absorb the cost of the reportingissuer providing an updated NOBO list, then an updated list could be provided to this party. An issuer agreed stating that if "reporting issuers must bear the costof requested NOBO lists, they should be able to provide a copy of their most recent list. If the requesting party wishes a more recent list, then [they] should bearthe cost of producing the list."
Response
The CSA have amended Part 6 of the proposed National Instrument to clarify the rights and obligations of a person or company other than a reporting issuerunder the Instrument. Section 6.1 now provides that a person or company other than a reporting issuer may obtain from a reporting issuer the most recentNOBO lists that are in the possession of the reporting issuer, upon payment of a fee. Section 6.2 now provides that a person or company other than a reportingissuer has all of the rights and obligations of a reporting issuer under the Instrument, except for certain enumerated provisions that related specifically to thecalling of meetings and the obtaining of voting instructions through omnibus proxies provided to management of the reporting issuer.
These changes have been made to ensure that, to the extent possible, a third party has the same rights and obligations of a reporting issuers under the proposedNational Instrument, and that the third party can exercise these rights without having to deal with the relevant reporting issuer. The effect of these amendmentswill be that a third party may request NOBO lists at any time from intermediaries on the same basis as reporting issuers.
Issue 7 - Form of Omnibus Proxy
The CSA requested comment on whether there were any possible conflicts between the specified forms of omnibus proxy and any form of proxy that may berequired pursuant to an issuer's governing legislation or constating documents.
IG requested that the Draft National Instrument clarify whether or not participants appointed in an omnibus proxy by depositories receive the form of proxy thatan issuer provides, which proxy would permit the participant to name an issuer's management as its proxyholder.
An issuer stated that there could be a problem when an omnibus proxy does not comply with the form of proxy specified in any issuer's constating document.The issuer stressed that the issue is perhaps not whether there is a conflict between these two proxies, but whether an omnibus proxy that does not comply isvalid.
Response
The CSA are satisfied that the forms of omnibus proxies contained in the Draft Forms are satisfactory, particularly in light of section 1.4 of the proposedNational Instrument (also in the Draft National Instrument), which provides that forms can be revised so long as the same information is contained in the revisedforms. The CSA expect that this provision could, if required, provide all necessary latitude for small amendments to the forms of omnibus proxy to deal with theissues raised by the commenters. The CSA also note that the procedures contained in the proposed National Instrument are substantially the same in this regardas under NP41, and do not believe that any changes are necessary.
Issue 8 - Electronic Transfer of Funds
The CSA invited comment on suggestions that it has received regarding whether it would be appropriate, at some time in the future, to mandate the electronictransfer of funds to facilitate the payment of fees.
Only one comment was received on this point. The CCSSA believed that it is appropriate to mandate in the Draft National Instrument the electronic transfer offunds. The CCSSA advised that such transfer is generally accepted and working well for SEDAR. With respect to the timing of this issue, the CCSSA stated thatthe implementation of the Instrument for the 1999 proxy season should not be jeopardized. However, the CCSSA noted that if the issue was not dealt with now,they believed that it may take some years before it received the required attention. As a result, the CCSSA questioned whether it would be possible to include inthe Draft National Instrument an amending provision so that the issue of the electronic transfer of funds could be easily mandated in the future.
Response
The CSA expect that the proposed National Instrument will be amended at some time in the future to provide for electronic transfer of funds, but do not wish tohold up the implementation of this Instrument until the details of electronic fund transfers can be developed.
Issue 9 - Transition Period
The CSA sought comments on the appropriateness of a transition period that requires the procedures contained in the Draft National Instrument to apply for ameeting held on or after March 1, 1999 and that NP41 continued to apply for meetings held before that time.
A substantial number of commenters felt that the transition periods proposed in the Draft National Instrument were too short. The view of most commenters onthis issue can be summarized by the comments provided by Stikeman/IICC:
This means that dealers, custodians and others must obtain NOBO and OBO information and have all programming and information systems operational and ableto reconcile NOBO and OBO positions at beneficial owner determination dates in time for the peak annual meeting period next year.
Stikeman/IICC stated that the CSA's adoption date is aggressive by comparison to the U.S. experience where a comparable rule adopted in July, 1983 did notbecome effective until January, 1986.
IICC, the IDA and the CBA expressed even stronger views on this issue, stating that the effective date of the Draft National Instrument is simply not possible toaccomplish within the time period contemplated. They argued that the financial community has huge resource commitments to accommodate the introduction ofthe Euro currency next year, including projects such as the Large Value Transfer System, the bring-on of money market instruments into the Debt ClearingSystem of CDS, changes to the U.S. tax-withholding rules and, most importantly, the compliance with Year 2000 requirements. IICC and CDS suggested thatCSA might want to review the feasibility of the implementation of the Instrument prior to the year 2000 as a result.
STAC and CIRI, however, believed that all parties would be able to comply with the time frame indicated by the CSA despite such concerns as the Year 2000commitments. STAC argued that the Draft National Instrument calls for a simple extension of current practices and that existing electronic communicationnetworks could be used to exchange data relating to the Draft National Instrument. While CDS does not anticipate any significant systems changes for itself,unlike STAC, CDS stated that many parties may be obliged to implement significant systems changes. An issuer stated that it plans to have the new procedures inplace in time for its next annual meeting in late April or early May, 1999.
Finally, the CCSSA note that due to the above comments, there is some uncertainty regarding when the Instrument will be implemented. The CCSSA and CIRIsuggested that it is extremely important that sufficient advance notice be given to all parties of the implementation date. CIRI suggested that notice be given nolater than October 31, 1998, assuming the implementation date of March 1, 1999 is retained. In addition, STAC requested that parties pleading inability tocomply, be required to specify a reasonable date with which they could comply and in the meantime, the CSA should consider giving issuers some form ofinterim relief.
Response
The CSA agree that the transition periods proposed in the Draft National Instrument were too short and has provided for more generous periods in the proposedNational Instrument. The CSA are continuing to propose that the proposed National Instrument come into force on January 1, 1999 but are proposing that theproposed National Instrument will apply to the sending of proxy-related materials for meetings held on or after October 1, 1999, and that the proposed NationalInstrument will apply to the sending of securityholder material other than proxy-related materials occurring on or after July 1, 1999. The sending of proxy-relatedmaterials for meetings held between January 1, 1999 and October 1, 1999 are exempt from the proposed National Instrument so long as they are sent inaccordance with NP41.
In addition, no person or company may request a NOBO list before July 1, 1999.
These changes are designed to permit participants in the shareholder material distribution process time to revise their operations as appropriate to be able tocomply with the proposed National Instrument.
4. COMMENTS ON SPECIFIC PROVISIONS OF THE DRAFT NATIONAL INSTRUMENT
Part 1 - Definitions and Interpretation
Section 1.1 - definition of "beneficial owner determination date"
Stikeman/IICC suggested that, because this definition is defined to be the record date for voting, or, in the absence of a record date for voting, the record datefor notice, complexities will arise where, in respect of a meeting, the record date for notice is not the same as the record date for voting. This will result in,among other things, new NOBO and OBO lists being required. Stikeman/IICC and the IDA believed that NOBO lists for mailings will not be provided until therecord date for voting and that systems will need to be programmed to accommodate these possibilities for both dates.
Response
The CSA understand the complexities that may arise if the record date for voting and the record date for the meeting are not the same. However, this possibilityis created by the corporate legislation of some jurisdictions (in particular, British Columbia), not by the proposed National Instrument. The CSA note that thispossibility exists at the present time under NP41 and that there is nothing that the CSA can do to remove the possibility.
Section 1.1 - definition of "CDS"
CDS commented that certain of its business operations are conducted through a subsidiary and requested that the definition be revised to include affiliates ofCDS.
Response
The CSA believe that a definition that includes "affiliates of CDS" is not necessary and have not made the suggested amendment.
Section 1.1 - definition of "depository"
CDS recommended changing the spelling of the defined term from "depositary" to "depository" to better reflect industry practice.
Response
The CSA have made the requested change.
Section 1.1 - definition of "intermediary"
The CBA noted that the definition of "intermediary" in NP41 specifically excludes:
a person or company that holds a security, or a trustee pursuant to a will, court order, inter-vivos trust, or trust for a pension plan, deferred profit sharing plan,retirement savings plan or other similar capital accumulation plan, with discretionary voting powers.
The CBA noted that the definition of "intermediary" in Draft National Instrument did not exclude these persons or companies and pointed out that an entity suchas a trust company acting as an administrator of a will or in the capacity of a discretionary investment manager, for example, would be considered anintermediary and would be required to comply with the provisions of the Draft National Instrument. The CBA does not believe that there are sufficient policyreasons for the change in the definition of intermediary and as a result, the CBA recommended that the definition of intermediary in the Draft National Instrumentshould be amended to carry over the exemptions found in NP41.
CDA suggested that it may be appropriate to amend the definition of "intermediary" to include affiliates of intermediaries.
Response
The CSA have amended this definition to provide that a beneficial owner of a security cannot be an intermediary in respect of that security. This change wasmade in response to the CBA comment to ensure that persons or companies holding securities on behalf of others and that have discretionary authority overthose securities not be considered intermediaries under the proposed National Instrument. Persons or companies that have discretionary authority over thesecurities, and thus have authority to provide instructions in a client response card, will be beneficial owners under this Instrument. The scheme of the proposedNational Instrument does not contemplate that a person or company can be both beneficial owner and intermediary with respect to the same security.
The CSA have not amended the definition to include "affiliates" of intermediaries. If an affiliate of an intermediary is holding securities on behalf of anotherperson or company, it will itself be an intermediary under the definition.
Section 1.1 - definition of "non-objecting beneficial owner list"
The CCSSA requested that the Draft National Instrument provide for small issuers who do not have the necessary software and do their own mailing, to receiveat their option, a printout of the NOBO list in the non-electronic format.
Response
The CSA have amended this definition to permit the preparation of NOBO lists in non-electronic form. The request for an electronic or non-electronic form ofNOBO list would be made in the request for beneficial ownership form (Form 54-101F2).
Section 1.1 - definition of "routine business"
The comments concerning this definition have been dealt with under the responses to specific questions, found above in "Issue 5 - Decline of Receipt of RoutineMaterials".
Section 1.1 - definition of "security"
The CCSSA suggested that to clarify the wider scope of this Draft National Instrument over NP41, this definition should be expanded to specify such securitiesas a common share, a preferred share and a debt instrument.
Response
The CSA do not consider the suggested change necessary and have not made the suggested amendment.
Part 2 - Reporting Issuers
Section 2.3 - Intermediary Search Request - Request to Depository
CDS recommended the removal of the requirement under paragraph 2.3(1)(a) of the Draft National Instrument for reporting issuers to request a list ofintermediaries at the same time as they send the depositary a notification of meeting and record date. CDS stated that a reporting issuer may have access to thatinformation from other sources and it would therefore be more practical if issuers were given the option of requesting an intermediary list from the depositary.
As a result of the suggested change to paragraph 2.3(1)(a), CDS recommended a parallel change to subsection 5.3(d) to clarify that the report from thedepository to a reporting issuer need only contain a copy of the intermediary master list if that was specifically requested by an issuer under subsection 2.3(1).
Response
The CSA believe that section 2.4, which relieves a reporting issuer from the requirement to conduct an intermediary master search if it has access to theinformation electronically, satisfactorily addresses the first comment, and have not made the suggested amendment.
In response to the second comment, section 5.4 of the Draft National Instrument has been deleted, and Part 6 amended to make the search requests of thirdparties subject to the same provisions as those of reporting issuers.
Section 2.5 - Request for Beneficial Ownership Information
STAC suggested that section 2.5 be expanded to enable issuers to request search totals electronically and to receive the search response information in anelectronic file.
CDS suggested that the requirement for a statutory declaration contained in NP41 in connection with a request for beneficial owner information be retained; theDraft National Instrument proposed the provision of an undertaking for this and other similar matters. CDS notes that legislation such as the BusinessCorporations Act (Ontario) calls for the provision of a statutory declaration by persons requesting the names of securityholders from an issuer or its transferagent.
Response
As indicated above under "Electronic Distribution and Communication", the CSA expect that most communication for the purposes of the proposed NationalInstrument will be in electronic format and believe that the communications referred to in the comment may be made in electronic format under the proposedNational Instrument without specific amendment.
The CSA agree with the comment on statutory declarations, and have amended the proposed National Instrument to require statutory declarations rather thanundertakings.
Section 2.12 - Indirect Sending of Securityholder Materials by Reporting Issuer
IG suggested that the Draft National Instrument be amended to clarify that the use of a transfer agent by a reporting issuer in sending materials directly toNOBOs is still permissible. This clarification, IG argued, may be necessary as a result of subsection 2.12(2) which recognizes that, in the past, the actual sendingof materials to beneficial owners has been attended to by third party service providers. IG suggested a similar amendment to section 4.2 of the Draft NationalInstrument.
Response
The CSA have made no amendments to the proposed National Instrument in connection with this comment. A person or company may generally dischargeobligations through agents, and it is not necessary to allude specifically to that.
Section 2.13 - Fee for Search
The CCSSA urged that if the "reasonable" search response fee continues to be $10.00 per NOBO list, then the Draft National Instrument should be clarified tospecify that one $10.00 fee covers information provided by an intermediary that appears with multiple nominees on both the intermediary master list and the listof registered holders.
Response
The CSA agree that the fee is for the information provided by each intermediary.
Section 2.16 - Explanation of Voting Rights
The CCSSA suggested that the Draft Companion Policy should be revised to explain how the beneficial owner may exercise voting rights.
Response
In response to this comment and the Stikeman/STAC proposal, the CSA have amended Forms 54-101F6 and 54-101F7 to provide additional instructions tobeneficial owners about the steps to be taken in order to be able to attend and vote at meetings.
Part 3 - Intermediaries' Obligations Concerning the Obtaining of Beneficial Owner Instructions
Section 3.3 - Transitional - Instructions from Existing Clients
IICC and the IDA expressed some concern that upon implementation of the proposed National Instrument, intermediaries would be required to re-canvass allexisting clients regarding confidentiality and the delivery of information. The proposed changes to the explanation to clients and client response cards should not,they argued, mandate that the client reconfirm instructions previously given under existing NP41. This, they maintained, is a very expensive operation with littlediscernable value.
Response
The CSA agree with this comment and have amended section 3.3 to give intermediaries the option of seeking new instructions under the proposed NationalInstrument from existing clients or relying on the choices made by those clients under NP41. The CSA believe that the choices made by clients under NP41, andthe consequence of not making those choices, are very similar to those made under the proposed National Instrument.
Section 3.5 - No Cost Return of Client Instructions
The CCSSA stated that the Draft National Instrument should specify that the cost of returning the client response card must be borne by the intermediary.
Response
The CSA have reconsidered the issue of whether clients should be guaranteed in the proposed National Instrument the ability to return client response cards andother matters at no expense to them. Upon consideration, the CSA have no objection to arrangements whereby clients are responsible for some of the costs, suchas postage, for providing instructions to an intermediary. The CSA consider this business matters best left between the client and the intermediary. Thereforesection 3.5 of the Draft National Instrument has been deleted.
Part 5 - Depositories
Section 5.1 - Intermediary Master List
STAC noted that CDS has stated that, at the present time, updates to the Intermediary Master List are only made on a semi-annual basis, and are not available inan electronic version. STAC suggested that information updated only semi-annually increases the risk of default of a party in the communication chain owing toout-of-date intermediary information. STAC stated that any such defaults cannot be the responsibility of an issuer or their agent. However, regardless of thefrequency of updates, STAC submitted that the list of intermediaries only need be reacquired when CDS advises that such updates have been done.
Response
Under the proposed National Instrument, as under the Draft National Instrument, CDS would be required to maintain a current intermediary master list, and theCSA expect that it will do so.
Section 5.4 - Response to Intermediary Search Request - Request by Person or Company Other than Reporting Issuer
CDS requested confirmation that the reference to "written application" in subsection 5.4(1) would encompass an application made by electronic means.
CDS stated that under existing NP41, a non-issuer requesting information on the holders of a security is obliged to provide a statutory declaration at the outsetof the process. The statutory declaration states that the party will only use the information for a purpose permitted under the Instrument. Under the DraftNational Instrument, the written undertaking (now referred to as a statutory declaration) is only required at the stage of requesting from the reporting issuer theinformation on NOBOs. CDS wondered whether this change may have been inadvertent. In any event, it is the view of CDS that it should be made clear thatrestrictions on the use of securityholder information apply also at the preliminary stage of determining which participants in a depositary have positions in thesecurity. As a result, it is suggested that subsection 5.4(2) include some reference to a statutory declaration/undertaking in addition to the reference alreadycontained in subsection 6.1(2).
Response
Due to the amendments made to Part 6 of the proposed National Instrument, section 5.4 of the Draft National Instrument has been deleted. In connection withthe deletion of section 5.4 and the amendments to Part 6, subsection 6.2(5) has been added. This provision ensures that a person or company other than areporting issuer making an intermediary search request will provide a statutory declaration at that time.
As indicated above, the CSA wish to facilitate and promote the use of electronic communication and, accordingly, have removed references to "written"wherever possible.
Section 5.5 - Depositary to send Participant Omnibus Proxy to Reporting Issuer
CDS pointed out that subsection 5.5(2) requires written confirmation of the omnibus proxy by the depository to each affected participant. CDS stated that thedepository should be able to give such confirmation by electronic means.
Response
The CSA have addressed this comment.
Part 6 - Use by Other Persons or Companies
Section 6.1 - Other Persons or Companies Request for NOBO List
The CCSSA urged the CSA to amend subsection 6.1(2) to require a third party requesting a NOBO list to provide an affidavit to an issuer, and not merely anundertaking. The CCSSA argued that the Draft National Instrument should conform to corporate legislation and not attach the form of affidavit.
Response
As indicated above, the CSA have amended the proposed National Instrument to require that a statutory declaration be used rather than an undertaking. TheCSA have decided to continue to prescribe the form of statutory declaration.
Section 6.2 - Provision of NOBO list to another Person or Company
The CCSSA suggested that, as "the CBCA provides for ten days to supply a list of registered holders, therefore an issuer should have four days to make therequest for beneficial owner information, instead of three".
Response
This amendment has not been made.
Section 6.4 - Other Persons or Companies - Indirect Sending
Tories argued that section 6.4 does not put third parties who may request a NOBO list on a completely equal footing with issuers because it appears that a thirdparty can only send materials indirectly through intermediaries and not directly.
The CCSSA requested that this section clarify that the distribution by a person or company of securityholder materials indirectly through proximateintermediaries should be at the expense of that person or company.
Response
The amendments to Part 6 put persons or companies other than reporting issuers on substantially the same footing as reporting issuers.
Part 7 - Prohibited Use
Section 7.1 - Use of NOBO List
Section 7.1 sets out limited ways in which a reporting issuer is permitted to use a NOBO list. The CBA submitted that subsection 7.1(d), which refers to "anyother matter relating to the affairs of the reporting issuer" may be interpreted broadly and lead some reporting issuers to believe that they can use NOBO lists formarketing or promotional purposes. The CBA stated that this is a particular concern in the mutual fund context where mutual fund companies who are reportingissuers may improperly use a NOBO list to build direct marketing relationships. A similar concern was expressed with respect to third party requests for NOBOlists. The CBA urged that the Draft Companion Policy clarify that the use of NOBO lists for competitive marketing purposes will be a violation of the rule andpunishable.
Response
The CSA consider the use of NOBO lists for marketing purposes inappropriate and clearly not matters "relating to the affairs of the reporting issuer". However,the proposed Companion Policy now clarifies that a breach of this rule is breach of the Draft National Instrument and securities legislation.
Part 8 - Miscellaneous
Section 8.1 - Default of Party in Communication Chain
CDS suggested that it would be useful to include a general relief provision in section 8.1 to the effect that failure by a party in the communication chain, otherthan the reporting issuer itself, to discharge its obligations under the Draft National Instrument shall not invalidate any action taken by an issuer in theexpectation that such obligations would be successfully discharged. CDS provided the example of where the holding of a meeting of securityholders should notbe invalidated simply because materials were not properly disseminated by a party in the communication chain.
The CCSSA pointed out that section 8.1 of the Draft National Instrument exempts a person or company from the timing provisions of the Draft NationalInstrument to the extent that the delay arose from the failure of another person or company. The CCSSA stated that a default by another party may force anissuer to incur additional costs in order to comply with the corporate legislation, that would otherwise have been unnecessary. The CCSSA questioned whowould be responsible for these costs and asked that the Draft National Instrument clearly set out the penalties for non-compliance.
Response
The CSA have chosen not to amend Part 8 or to provide specific relief in the matters described in these comments. The CSA do not believe that the liabilityconcerns in this context are substantially different from the concerns arising in other contexts in which the obligations of one party do not arise until anotherparty has completed a required action. In addition, the CSA do not believe it is possible to allocate, by way of a rule, the proper responsibilities for costs that mayarise in cases of non-compliance. This type of allocation is best left to negotiation among the affected parties or, ultimately, judicial determination.
Section 8.3 - Free Return of Voting Instructions
Blain and STAC observed that under some current company/corporation acts, issuers are not required to provide registered holders with postage prepaid replyenvelopes for the return of completed proxies. STAC suggested that it is inappropriate to provide this privilege to the non-registered holders and argued for theremoval of section 8.3 in its entirety. The CCSSA also recommended the deletion of this section in order to give an issuer the choice as to whether it (i.e. a smallissuer) preferred to have the beneficial holder pay, or if it (i.e. a larger issuer) preferred to pay, hoping to encourage a good return. In addition, the CCSSAstated that if a beneficial holder returns instructions electronically, which may result in greater costs, an issuer should not be required to pay these costs.
Blain questioned whether there was an intention with the language used to require beneficial shareholders to receive postage paid envelopes and requested thatthe provision be clarified. Blain stated that its personal preference would be not to mandate the use of postage paid envelopes that would result in having topre-stamp envelopes or arrange for special Canada Post metering arrangements, which may be viewed as an unnecessary and unreasonable burden to place onsmaller issuers.
Response
As discussed in the summary of comments on section 3.5 of the Draft National Instrument, the CSA have reconsidered the issue of whether clients should beguaranteed in the proposed National Instrument the ability to return client response cards and other matters at no expense to them, and for the reasons discussedunder section 3.5, section 8.3 of the Draft National Instrument, like section 3.5, has been deleted.
5. COMMENTS ON SPECIFIC PROVISIONS OF THE DRAFT FORMS
Form 54-101F1 - Explanation to Clients and Client Response Card
Manulife pointed out that under NP41, intermediaries may include Form C as part of their New Account Application Form. Manulife requested clarification as towhether this Form may be adapted to form part of a New Account Application Form by intermediaries.
Blain questioned whether it was intentional not to include deeming langauge with one of the choices to be made under the client response card concerning whatchoice the client is deemed to have selected if neither of the options are marked with an ""x.
CIRI recommended that Part 3 of the Client Response Card of this Form state that French material will be sent at the shareholder's request "if available" for thoseissuers who do not normally produce shareholders material in French.
The CCSSA suggested that to avoid confusion, the explanation in the client response card should note that no annual reminder will be sent to the client. The cardshould also provide for a mechanism for changing instructions, and to inform clients that instructions will remain in effect until amended by the client.
To be consistent with the trend towards electronic communication, the CCSSA suggested that the card be available electronically so that the client mightdownload and print it, and then sign and return it to the intermediary.
Response
Section 1.4 of the proposed National Instrument specifically provides that forms required under the Instrument may be combined with another form ordocument, so long as the other form or document requests or contains the same information as the required form.
With respect to the second comment, the CSA have added deeming language in connection with each choice to be made under the client response card.
With respect to the third comment, the CSA have made the suggested change.
With respect to the fourth comment, the CSA have not made the change, in order to keep the forms as short as possible. The CSA have confidence thatintermediaries will properly explain the use and purpose of this form to their clients.
With respect to the fifth comment, the CSA have no objection to this procedure.
Form 54-101F2 - Request for Beneficial Ownership Information
The CCSSA suggested that the undertaking referred to in the first paragraph of Item 10 of Part 1 of this Form should use prescribed wording, and provided arevised Item 10 for consideration by the CSA.
STAC suggested that the Form be changed to contemplate preliminary search requests.
Response
With respect to the first comment, the CSA have now provided that all persons or companies requesting beneficial ownership information must provide astatutory declaration in the form of Form 54-101F8.
With respect to the second comment, the CSA have made the suggested changes.
Form 54-101F3 - Omnibus Proxy for Depositaries
CDS proposed that the requirement for including "place of meeting" be deleted from this Form as CDS is not generally advised of this information in the meetingnotices it receives from reporting issuers. CDS suggested that if this recommendation is not accepted, then subsection 2.2(2) of the Draft National Instrumentshould be amended to require that reporting issuers advise the depository (and the other entities listed in subsection 2.2(1)) of the place of the meeting.
CDS suggested that the second paragraph of this Form be prefaced by words, such as "In accordance with the provisions of securities legislation," to reflect thefact that the prohibition against voting except in accordance with the written instructions is a requirement of the various securities acts. CDS stated thatcurrently, it may appear that this prohibition was imposed by the depositary itself.
Response
The CSA have made both of these suggested changes.
Form 54-101F5 - Electronic Format for NOBO List
Desjardins pointed out that this Form is issued by brokers while banks and trust companies use a different form as a result of their computer systems. Desjardinstook the position that a new format should be mandated which could be used by all participants. Desjardins proposed that CDS receive all files and transmit themto an issuer or its transfer agent. Desjardins argued that this would be the most efficient solution.
Response
The CSA believe that this form is appropriate and have not made the suggested changes.
Form 54-101F6 - Request for Voting Instructions Made by a Reporting Issuer
Blain stated that the sentence "Should you wish to attend the meeting and vote in person, please bring this form to the meeting" in this Form is somewhatmisleading in that the person electing this method will not be voting in person but rather as a special appointment proxy holder through a series of proxies.
Response
The CSA have amended this sentence by the addition of more detailed instructions concerning the steps to be taken by a beneficial owner that wishes to attend ameeting and vote in person. The new instructions are designed to reflect the system now in place that permits beneficial owners to indicate that they wish toattend, and vote at, meetings.
Form 54-101F8 - Undertaking
The CCSSA suggested that this Form be eliminated. A discussion of this recommendation is found above in "Section 6.1 - Other Persons or Companies -Request for NOBO List".
CDS recognized that certain changes would be made to this Form if the CSA were to accept its recommendations regarding the use of a statutory declaration inplace of an undertaking, and timing of the requirement for the statutory declaration/undertaking. In addition, if CDS's recommendations were accepted, CDSsuggested that the purpose set out in section 3(a), namely the sending of securityholder information to NOBOs in accordance with the Draft National Instrument,would have to be changed if the statutory declaration/undertaking was required at an earlier time.
CDS also stated that if the scope of the Draft National Instrument is expanded to apply to any type of distribution of materials by a non-issuer, a comparableprovision would be necessary to make it clear that the permitted purposes under the Draft National Instrument are not necessarily restricted to matters relating tothe affairs of the reporting issuer.
Response
The form has been amended to that of a statutory declaration, rather than an undertaking, and the wording has been amended to reflect the purposes for which itis now required under the proposed National Instrument.
6. COMMENTS ON SPECIFIC PROVISIONS OF THE DRAFT COMPANION POLICY
Section 2.1 - Application of Instrument
CDS stated that the international character of securities clearing and settlement systems, and the trend toward increasing globalization of the industry, raisejurisdictional issues for consideration. CDS suggested that where a foreign intermediary is under a legal obligation to disseminate securityholder information byvirtue of its own domestic securities law, the Draft National Instrument should not apply to that entity.
Response
Consistent with the general approach of legislation, the proposed National Instrument does not address its own jurisdiction.
Section 5.1 - General
CDS requested clarification regarding the reference in section 5.1 to the "most efficient means of sending information or securityholder material". CDS statedthat it was unclear whether the "most efficient means" is intended to focus on the speed of the delivery, on the cost of delivery, or on both.
Response
The CSA suggest that it means both speed and cost.
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
TABLE OF CONTENTS
PART TITLE
PART 1 DEFINITIONS AND INTERPRETATION
1.1 Definitions
1.2 Agents and Nominees
1.3 Holding of Security by Intermediary
1.4 Use of Required Forms
1.5 Fees
PART 2 REPORTING ISSUERS
2.1 Establishment of Meeting and Record Dates
2.2 Notification of Meeting and Record Dates
2.3 Intermediary Search Request - Request to Depository
2.4 No Intermediary Search Request if Reporting Issuer has Electronic Access
2.5 Request for Beneficial Ownership Information
2.6 No Depositories or Intermediaries are Registered Holders
2.7 Sending Proxy-Related Materials to Beneficial Owners
2.8 Other Securityholder Materials
2.9 Direct Sending of Proxy-Related Materials to NOBOs by Reporting Issuer
2.10 No Sending Securityholder Materials Against Instructions
2.11 Disclose How Information Obtained
2.12 Indirect Sending of Securityholder Materials by Reporting Issuer
2.13 Fee for Search
2.14 Fee for Sending Materials Indirectly
2.15 Adjournment or Change in Meeting
2.16 Explanation of Voting Rights
2.17 Request for Voting Instructions
2.18 Tabulation and Execution of Voting Instructions
PART 3 INTERMEDIARIES' OBLIGATIONS CONCERNING THE OBTAINING OF BENEFICIAL OWNER INSTRUCTIONS
3.1 Intermediary Information to Depository
3.2 Instructions from New Clients
3.3 Transitional - Instructions from Existing Clients
3.4 Clients that are Intermediaries
3.5 Application of Instructions to Accounts
3.6 Non-receipt of Instructions
3.7 OBOs to Bear Cost of Confidentiality
PART 4 INTERMEDIARIES' OTHER OBLIGATIONS
4.1 Request for Beneficial Ownership Information - Response
4.2 Sending of Securityholder Materials to Beneficial Owners by Intermediaries
4.3 No Sending Securityholder Materials Against Instructions
4.4 Request for Voting Instructions
4.5 Tabulation and Execution of Voting Instructions
PART 5 DEPOSITORIES
5.1 Intermediary Master List
5.2 Index of Meeting and Record Dates
5.3 Depository Response to Intermediary Search Request by Reporting Issuer
5.4 Depository to send Participant Omnibus Proxy to Reporting Issuer
PART 6 OTHER PERSONS OR COMPANIES
6.1 Requests for NOBO Lists from a Reporting Issuer
6.2 Other Rights and Obligations of Persons and Companies other than Reporting Issuers
PART 7 PROHIBITED USE
7.1 Use of NOBO List
7.2 Trafficking in Information Prohibited
PART 8 MISCELLANEOUS
8.1 Default of Party in Communication Chain
8.2 Right to Proxy
PART 9 EXCEPTIONS AND EXEMPTIONS
9.1 Audited Annual Financial Statements or Annual Report
9.2 Exemptions
PART 10 EFFECTIVE DATES
10.1 Effective Date
10.2 Sending of Proxy-Related Materials
10.3 Sending of Other Securityholder Materials
10.4 NOBO Lists
NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER(4)
PART 1 DEFINITIONS AND INTERPRETATION(5)
1.1 Definitions - In this Instrument
"affairs" means the relationship among a reporting issuer, its affiliates, and their securityholders, partners, directors and officers, other than the business carriedon by the reporting issuer;
"annual report" means an annual report of a reporting issuer that includes the audited annual financial statements of the reporting issuer, and any other documentrequired by Canadian securities legislation(6) to be included in or sent with an annual report;
"beneficial owner" means, for a security held by an intermediary, the person or company that is identified as providing the instructions contained in a clientresponse card or, if no instructions are provided, the person or company that has the authority to provide those instructions;
"beneficial owner determination date" means, for a meeting
(a) the record date for voting, or
(b) in the absence of a record date for voting, the record date for notice;
"business day" means a day other than a Saturday, Sunday or statutory holiday in the local jurisdiction(7);
"CDS" means the Canadian Depository for Securities Limited and any successor to its depository business;
"client" means a person or company on whose behalf an intermediary directly holds a security;
"client response card" means the form of response card set out in the required form(8);
"corporate law" means, for a reporting issuer, any legislation, constating instrument or agreement that governs the affairs of the reporting issuer;
"day" means a calendar day unless express reference is made to a business day;
"depository" means CDS and any other person or company recognized as a depository by the securities regulatory authority(9) for the purpose of this Instrument;
"explanation to clients" means the form of explanation to clients set out in the required form(10);
"FINS" means Financial Institution Numbering System;
"intermediary" means, for a security, a person or company that, in connection with its business, holds the security on behalf of another person or company, otherthan
(a) a person or company that holds the security only as a custodian,
(b) a depository, or
(c) a beneficial owner of the security;(11)
"intermediary master list" means a list of intermediaries that a depository maintains under section 5.1;
"intermediary search request" means the request referred to in section 2.3;
"meeting" means a meeting of securityholders of a reporting issuer;
"NOBO" means a non-objecting beneficial owner;
"NOBO list" means a non-objecting beneficial owner list;
"nominee" means a person or company that acts as a passive title-holder to hold securities and does not carry on business in its own right;
"non-objecting beneficial owner" means a beneficial owner of securities that
(a) has provided instructions to an intermediary holding the securities on behalf of the beneficial owner that the beneficial owner does not object to theintermediary disclosing ownership information about the beneficial owner under this Instrument,
(b) has not provided instructions to an intermediary holding the securities on behalf of the beneficial owner as to whether the beneficial owner objects to theintermediary disclosing ownership information about the beneficial owner under this Instrument, or
(c) is a non-objecting beneficial owner under subparagraph 1 of paragraph 3.3(1)(b)(12);
"non-objecting beneficial owner list" means, for an intermediary, a list that includes ownership information concerning NOBOs on whose behalf the intermediary,or another intermediary holding directly or indirectly through the intermediary, holds securities and information regarding instructions from those NOBOsconcerning receipt of securityholder materials and
(a) if prepared in non-electronic form, is in a clear and readable format and contains the information prescribed in the required form(13); or
(b) if prepared in electronic form, is prepared in accordance with, and contains the information prescribed in, the required form;
"notification of meeting and record dates" means the notification referred to in section 2.2;
"NP41" means National Policy Statement No. 41 or a rule based on National Policy Statement No. 41;
"objecting beneficial owner" means a beneficial owner of securities that
(a) has provided instructions to an intermediary holding the securities on behalf of the beneficial owner that the beneficial owner objects to the intermediarydisclosing ownership information about the beneficial owner under this Instrument, or
(b) is an objecting beneficial owner under subparagraph 2 of paragraph 3.3(1)(b);(14)
"OBO" means an objecting beneficial owner;
"omnibus proxy" means, for a meeting
(a) for a depository, a proxy set out in the required form(15), and
(b) for an intermediary, a proxy set out in the required form(16);
"ownership information" means, for a beneficial owner of securities that holds the securities through an intermediary in an account of the intermediary, thebeneficial owner's name, address, holdings of the securities in the account and preferred language of communication;
"participant list" means a list of participants in a depository;
"participant in a depository" means a person or company for whom a depository maintains an account in which entries may be made to effect a transfer or pledgeof a security;
"preferred language of communication" means either English or French;
"proximate intermediary" means, for a security
(a) a participant in a depository holding the security; or
(b) an intermediary that is a registered holder of the security;
"proxy-related materials" means securityholder material relating to a meeting that the reporting issuer is required under corporate law or securities legislation(17)to send to the registered holders of the securities;
"record date for notice" means, for a meeting, the date established in accordance with corporate law for the determination of the registered holders of securitiesthat are entitled to receive notice of the meeting;
"record date for voting" means, for a meeting, the date, if any, established in accordance with corporate law for the determination of the registered holders ofsecurities that are entitled to vote at the meeting;
"registered holder" means, for a security, the person or company shown as the holder of the security on the books or records of the reporting issuer;
"request for beneficial ownership information" means, for a security, a request for beneficial ownership information in the required form sent by a reporting issuerto a proximate intermediary holding the security(18);
"request for voting instructions" means, for a security that carries the right to vote at a meeting
(a) if the request is made by the reporting issuer, a request for voting instructions from a beneficial owner of the security that is a NOBO, set out in the requiredform(19), and
(b) if the request is made by an intermediary, a request for voting instructions from the beneficial owner of the security on whose behalf the intermediary holdsthe security, set out in the required form(20);
"routine business" means, for a meeting
(a) consideration of the minutes of an earlier meeting,
(b) consideration of the financial statements of the reporting issuer or an auditor's report on the financial statements of the reporting issuer,
(c) election of directors of the reporting issuer,
(d) setting or changing of the number of directors to be elected within a range permitted by corporate law, if no change to the constating documents of thereporting issuer is required in connection with that action, and
(e) reappointment of an incumbent auditor of the reporting issuer;(21)
"security" means a security of a reporting issuer;
"securityholder" means, for a security, the registered holder of the security, the beneficial owner of the security, or both, depending upon the context;
"securityholder materials" means, for a reporting issuer, materials that are sent to registered holders of securities of the reporting issuer; and
"send" means to deliver, send or forward or arrange to deliver, send or forward
(a) by prepaid mail or courier, or
(b) with the consent of the recipient, by electronic means or other form of delivery.(22)
1.2 Agents and Nominees
(1) A reference in this Instrument to a depository, intermediary or reporting issuer includes a nominee or agent of the depository, intermediary or reportingissuer.
(2) A person or company that uses an agent remains fully responsible for its compliance with the requirements of this Instrument.
1.3 Holding of Security by Intermediary - In this Instrument, an intermediary is considered to hold a security if the security is held
(a) by the intermediary directly;
(b) by the intermediary indirectly through another person or company on behalf of the intermediary.
1.4 Use of Required Forms
(1) A person or company required to send or use a required form under this Instrument may substitute another form or document or combine the required formwith another form or document, so long as the form or document used requests or includes the same information contemplated by the required form.
(2) Subsection (1) does not apply to the required form of a NOBO list prepared in electronic form.(23)
1.5 Fees - Fees payable under this Instrument shall be in the amounts specified in Appendix A.(24)
PART 2 REPORTING ISSUERS
2.1 Establishment of Meeting and Record Dates - A reporting issuer that is required to give notice of a meeting to the registered holders of any of itssecurities shall fix
(a) a date for the meeting;
(b) a record date for notice of the meeting, which shall be no fewer than 35 and no more than 60 days before the meeting date; and
(c) if required or permitted by corporate law, a record date for voting at the meeting.
2.2 Notification of Meeting and Record Dates
(1) Before(25) the record date for notice of a meeting, the reporting issuer shall send a notification of meeting and record dates to
(a) all depositories;
(b) the securities regulatory authority in each jurisdiction(26) in which the reporting issuer is a reporting issuer; and
(c) each stock exchange in Canada on which securities of the reporting issuer are listed.
(2) The notification of meeting and record dates referred to in subsection (1) shall specify
(a) the name of the reporting issuer;
(b) the date fixed for the meeting;
(c) the record date for notice;
(d) the record date for voting, if any;
(e) the classes or series of securities that carry the right to receive notice of the meeting;
(f) the classes or series of securities that carry the right to vote at the meeting;
(g) whether only routine business is to be conducted at the meeting; and
(h) the beneficial owner determination date.
2.3 Intermediary Search Request - Request to Depository
(1) At the same time as a reporting issuer sends a notification of meeting and record dates for a meeting to a depository, the reporting issuer shall request thedepository to send to the reporting issuer
(a) a list of all intermediaries and their nominees shown on the intermediary master list;
(b) subject to section 2.4, a list setting out the names, addresses and respective holdings of participants in the depository of each class or series of securities thatentitle the holder to receive notice of the meeting or to vote at the meeting; and
(c) a form of omnibus proxy(27) appointing, as the depository's proxy, each participant on whose behalf, and to the extent that, the depository holds securities thatcarry the right to vote at the meeting.
(2) In addition to making the request referred to in subsection (1) in connection with a meeting, a reporting issuer may request, at any time, a depository to sendthe information referred to in either or both of paragraph (1)(a) and paragraph (1)(b) for any class or series of securities of the reporting issuer specified by thereporting issuer in the request.
2.4 No Intermediary Search Request if Reporting Issuer has Electronic Access - A reporting issuer shall not request from the depository informationreferred to in paragraph 2.3(1)(a) or (b) if the information is included on a file maintained by the depository in electronic format and the reporting issuer hasaccess to the file.
2.5 Request for Beneficial Ownership Information
(1) Before(28) the record date for notice of a meeting, the reporting issuer, using information provided by depositories under section 5.3 or referred to in section2.4, shall complete Part 1 of a request for beneficial ownership information(29) and send it to all proximate intermediaries identified as holding the securities thatcarry the right to receive notice of the meeting or to vote at the meeting.
(2) In addition to making the request referred to in subsection (1) in connection with a meeting, a reporting issuer may make, at any time, a request for beneficialownership information in the manner referred to in subsection (1).
(3) A reporting issuer that makes a request for beneficial ownership information under either subsection (1) or (2) that includes a request for NOBO lists shallprovide a statutory declaration in the required form(30) of the reporting issuer.
2.6 No Depositories or Intermediaries are Registered Holders - A reporting issuer is not subject to section 2.3, 2.5 or 2.7 if none of the registered holders ofits securities are depositories or intermediaries identified on the intermediary master register.
2.7 Sending Proxy-Related Materials to Beneficial Owners - A reporting issuer that is required by Canadian securities legislation to send proxy-relatedmaterials to the registered holders of any class or series of its securities shall send, subject to sections 2.10 and 2.17, the proxy-related materials to beneficialowners of the securities, by either sending
(a) directly to NOBOs, and indirectly under section 2.12 to OBOs; or
(b) indirectly under section 2.12 to all beneficial owners.
2.8 Other Securityholder Materials - A reporting issuer may, but is not required to, send securityholder materials other than proxy-related materials tobeneficial owners of its securities, by either sending
(a) directly to NOBOs, and indirectly under section 2.12 to OBOs; or
(b) indirectly under section 2.12 to beneficial owners.
2.9 Direct Sending of Proxy-Related Materials to NOBOs by Reporting Issuer - A reporting issuer that has stated in its request for beneficial ownershipinformation sent in connection with a meeting that it will send proxy-related materials to, and seek voting instructions from, NOBOs shall, subject to section2.10, send, at its expense, at least 21 days before the date fixed for the meeting, the proxy-related materials for the meeting directly to the NOBOs on the NOBOlists received in response to the request.(31)
2.10 No Sending Securityholder Materials Against Instructions - Except as required by securities legislation, no reporting issuer that uses a NOBO list tosend securityholder materials directly to NOBOs on the NOBO list shall send the securityholder materials to NOBOs that are identified on the NOBO list ashaving declined to receive those materials unless the reporting issuer has specified in the request for beneficial ownership information sent under section 2.5 inconnection with the sending of materials that the securityholder materials will be sent to all beneficial owners of securities.(32)
2.11 Disclose How Information Obtained - A reporting issuer that uses a NOBO list to send securityholder materials directly to NOBOs on the NOBO listshall include in the materials the following statement:
"These securityholder materials are being sent to both registered and non-registered owners of the securities. The names and addresses of owners of thesecurities that are not registered holders, and disclosure of their holdings of securities, have been obtained from intermediaries holding on behalf of thoseowners in accordance with applicable securities regulatory requirements."
2.12 Indirect Sending of Securityholder Materials by Reporting Issuer
(1) A reporting issuer sending securityholder materials indirectly to beneficial owners shall send to each proximate intermediary that responded to the applicablerequest for beneficial ownership information the number of sets of those materials specified by that proximate intermediary
(a) at least three business days before the twenty-first day before the date fixed for the meeting, in the case of proxy-related materials; or
(b) on the day specified in the request for beneficial ownership information, in the case of securityholder materials that are not proxy-related materials.
(2) A reporting issuer may satisfy its obligation to send securityholder materials to an intermediary under this section by sending the securityholder materials to aperson or company designated by the intermediary as a person or company that will attend to the sending of the materials to appropriate beneficial owners withinthe time periods required by this section.
(3) If a proximate intermediary in a foreign jurisdiction(33) holds securities on behalf of NOBOs and the law in that foreign jurisdiction prohibits the reportingissuer from sending securityholder materials directly to the NOBOs, the reporting issuer shall send to the proximate intermediary the number of sets of thesecurityholder materials requested by the proximate intermediary.
2.13 Fee for Search - A reporting issuer shall pay a fee to a proximate intermediary for responding to a request for beneficial ownership information(34) made bythe reporting issuer.(35)
2.14 Fee for Sending Materials Indirectly
(1) A reporting issuer that sends securityholder materials indirectly to NOBOs through a proximate intermediary shall pay to the proximate intermediary, uponreceipt by the reporting issuer of a certificate of mailing to NOBOs in accordance with the mailing instructions specified by the reporting issuer in the request forbeneficial ownership information or other satisfactory proof of sending
(a) a fee for sending the securityholder materials on to the NOBOs;
(b) the actual cost of any postage incurred by the proximate intermediary in sending the securityholder materials to the NOBOs in accordance with the mailinginstructions specified by the reporting issuer in the request for beneficial ownership information(36); and
(c) if the securityholder materials were not sent by first class mail, the reasonable costs associated with the preparation by the proximate intermediary of thesecurityholder materials for mailing to NOBOs in accordance with the mailing instructions specified by the reporting issuer in the request for beneficial ownershipinformation.(37)
(2) A reporting issuer that sends securityholder materials, indirectly through a proximate intermediary, to OBOs that have declined in accordance with thisInstrument to receive those materials, shall pay to the proximate intermediary, upon receipt by the reporting issuer of a certificate of mailing to NOBOs inaccordance with the mailing instructions specified by the reporting issuer in the request for beneficial information or other satisfactory proof of sending
(a) a fee for sending the securityholder materials on to the OBOs;
(b) the actual cost of any postage incurred by the proximate intermediary in sending the securityholder materials to those OBOs in accordance with the mailinginstructions specified by the reporting issuer in the request for beneficial ownership information; and
(c) if the securityholder materials were not sent by first class mail, the reasonable costs associated with the preparation by the proximate intermediary of thesecurityholder materials for mailing to NOBOs in accordance with the mailing instructions specified by the reporting issuer in the request for beneficialinformation.(38)
2.15 Adjournment or Change in Meeting - A reporting issuer that is required to give a notice of adjournment or other change for a meeting to registeredholders of its securities shall immediately send a notice of the adjournment or change, including any change in the beneficial owner determination date, to
(a) each of the persons or companies referred to in subsection 2.2(1) and to the proximate intermediaries for the securities; and
(b) the persons and companies to whom the reporting issuer sent the original notification of meeting and record dates under this Instrument.
2.16 Explanation of Voting Rights - Proxy-related materials sent to a beneficial owner of securities shall explain, in plain language, how the beneficial ownermay exercise voting rights attached to the securities.
2.17 Request for Voting Instructions - A reporting issuer that sends proxy-related materials that solicit votes or voting instructions directly to a NOBO shallprepare and include with the proxy-related materials, in substitution for the proxy otherwise contained in the proxy-related materials, a request for votinginstructions(39) for the matters to which the proxy-related materials relate for return to the reporting issuer.
2.18 Tabulation and Execution of Voting Instructions - A reporting issuer shall
(a) tabulate the voting instructions received from NOBOs in response to a request for voting instructions referred to in section 2.17; and
(b) through the actions of management of the reporting issuer, execute the voting instructions as instructed by the NOBOs, to the extent that the management ofthe reporting issuer holds the corresponding proxy.
PART 3 INTERMEDIARIES' OBLIGATIONS CONCERNING THE OBTAINING OF BENEFICIAL OWNER INSTRUCTIONS
3.1 Intermediary Information to Depository
(1) An intermediary shall send, by the later of the date the intermediary commences business and the date this Instrument comes into force, notice to eachdepository of
(a) the intermediary's name and address;
(b) the name and address of each nominee of the intermediary in whose name the intermediary holds securities on behalf of beneficial owners; and
(c) the name, address, telephone number, fax number and any electronic mail address of a representative of the intermediary.
(2) An intermediary shall send notice to each depository of a change in the information contained in a notice given under this section within five business daysafter the change.
3.2 Instructions from New Clients - Subject to sections 3.3 and 3.4, an intermediary that opens an account for a client shall, before the intermediary holdssecurities on behalf of the client in the account, send to the client an explanation to clients and a client response card(40) and obtain instructions from the client onthe matters to which the client response card pertains.
3.3 Transitional - Instructions from Existing Clients
(1) An intermediary that holds securities on behalf of a client in an account that was opened before this Instrument comes into force shall
(a) send to the client an explanation to clients and client response card and request the client to complete and return to the intermediary the client responsecard;(41) or
(b) rely on the choices previously made by the client under NP41 in respect of that account, on the following basis:
1. If the client chose under NP41 to permit the intermediary to disclose the client's name and security holdings to the issuer of the security or other sender ofmaterial, or if the intermediary was permitted under NP41 to disclose that information to those persons or companies, the client is a NOBO under thisInstrument.
2. If the client chose under NP41 not to permit the intermediary to disclose the client's name and security holdings to the issuer of the security or other sender ofmaterial, the client is an OBO under this Instrument.
3. If the client chose under NP41 not to receive material relating to annual or special meetings of securityholders or audited financial statements, or if theintermediary was permitted under NP41 not to provide that material to the client, the client is considered to have declined under this Instrument to receiveproxy-related materials for meetings at which only routine business is to be conducted and materials sent to securityholders that are not required by corporate orsecurities law to be sent.
4. If the client chose under NP41 to receive material relating to annual or special meetings of securityholders or audited financial statements, the client isconsidered to have chosen under this Instrument to receive all securityholder materials sent to beneficial owners of securities.
5. The client is considered to have chosen under this Instrument as the preferred language of communication the language that has been customarily used by theintermediary to communicate with the client.
(2) An intermediary that takes the actions described under paragraph (1)(a) in connection with a client may not rely upon choices previously made by the clientunder NP41.(42)
3.4 Clients that are Intermediaries - A client that is itself an intermediary is not required to return any client response card received by it in connection withsecurities of which it is an intermediary.
3.5 Application of Instructions to Accounts - The instructions given to an intermediary by a beneficial owner under this Part apply in respect of all securitiesheld by the beneficial owner in the account of the intermediary identified in the client response card.
3.6 Non-receipt of Instructions
(1) A beneficial owner that does not provide instructions to the intermediary of which it is a client concerning disclosure of ownership information concerning thebeneficial owner is considered to have consented, with respect to the securities in the beneficial owner's account with the intermediary, to the disclosure ofownership information under this Instrument.
(2) A beneficial owner that does not provide instructions to the intermediary of which it is a client concerning receipt of securityholder materials is considered tohave chosen, with respect to the securities in the beneficial owner's account with the intermediary, to receive all securityholder materials sent to beneficial ownersof securities under this Instrument other than
(a) proxy-related materials for meetings at which only routine business is to be conducted; and
(b) securityholder materials not required under securities legislation or corporate law to be sent to registered holders of securities.
(3) A beneficial owner that does not provide instructions to the intermediary of which it is a client concerning the preferred language of communication isconsidered to have chosen as the preferred language of communication the language that has been customarily used by the intermediary to communicate with theclient.
3.7 OBOs to Bear Cost of Confidentiality
(1) An intermediary that sends securityholder materials to an OBO in accordance with this Instrument is entitled to recover from the OBO the reasonable costs,including postage, incurred by the intermediary in sending the securityholder materials to the OBO.
(2) Despite subsection (1), an intermediary is not entitled to recover its costs from an OBO in sending securityholder materials to an OBO that has declined inaccordance with this Instrument to receive those materials if the intermediary has sent those materials as the result of the reporting issuer specifying in therequest for beneficial ownership information sent under section 2.5 in connection with the sending of materials that the securityholder materials shall be sent to allbeneficial owners of securities.(43)
PART 4 INTERMEDIARIES' OTHER OBLIGATIONS
4.1 Request for Beneficial Ownership Information - Response
(1) A proximate intermediary that receives a request for beneficial ownership information(44) from a reporting issuer that pertains to the sending of securityholdermaterials but that does not pertain to the sending of securityholder materials for a meeting shall, within three business days of receiving the request, send to thereporting issuer, the information referred to in Part 2 of the request for beneficial ownership information.
(2) A proximate intermediary that receives a request for beneficial ownership information from a reporting issuer that pertains to a meeting shall send to thereporting issuer
(a) within three business days of receiving the request, the information referred to in Part 2 of the request for beneficial ownership information other than Item 6;and
(b) if the request contained a request for a NOBO list, within three business days after the record date for notice of the meeting specified in the request, inelectronic format, the information referred to in Item 6 of Part 2 of the request for beneficial ownership information as at the beneficial owner determination dateof the meeting; and
(c) within three business days after the record date for notice of the meeting specified in the request, if the request stated that the reporting issuer will sendproxy-related materials to, and seek voting instructions from, NOBOs, a form of omnibus proxy(45) that appoints management of the reporting issuer as theproximate intermediary's proxy holder for the securities held, as of the beneficial ownership determination date, on behalf of each NOBO identified on the NOBOlist, in respect of which the proximate intermediary is either the registered holder or proxy holder.(46)
(3) A proximate intermediary that receives a request for beneficial ownership information from a reporting issuer that contains a request for a NOBO list butdoes not pertain to a meeting shall, within three business days of receiving the request, send to the reporting issuer the information referred to in Part 2 of therequest for beneficial ownership information.
(4) The response of a proximate intermediary to a reporting issuer given under this section shall be a consolidated response relating to all beneficial owners ofeach class and series of securities specified in the request for beneficial ownership information that hold, directly or indirectly, through the proximateintermediary.
(5) An intermediary holding securities, directly or indirectly, through a proximate intermediary, shall take all necessary steps to ensure that the proximateintermediary is provided with the information required to enable it to satisfy its obligations under this section by the times required by this section.
(6) An intermediary is not required under this Instrument to provide ownership information concerning an OBO to any person or company.
4.2 Sending of Securityholder Materials to Beneficial Owners by Intermediaries
(1) A proximate intermediary that receives securityholder materials from a reporting issuer for sending to beneficial owners shall send, subject to section 4.3,within three business days of receipt
(a) subject to securities legislation(47), one set of the materials to each OBO that is a client of the proximate intermediary;
(b) subject to securities legislation, one set of the materials to each NOBO of the relevant securities if the reporting issuer stated in the applicable request forbeneficial ownership information, or otherwise advised the proximate intermediary, that the reporting issuer will send the materials to NOBOs indirectly throughintermediaries; and
(c) appropriate quantities of materials to all intermediaries holding securities of the relevant class or series that are clients of the proximate intermediary, forsending by them under subsection (2).
(2) An intermediary that receives securityholder materials from another intermediary under this section shall send, within one business day of receipt
(a) subject to securities legislation, one set of the materials to each OBO that is a client of the intermediary; and
(b) appropriate quantities of the materials to all intermediaries holding securities of the relevant class or series that are clients of the intermediary for sending bythem under this subsection.
(3) The persons or companies to whom securityholder materials are sent under this section shall be determined
(a) as at the beneficial owner determination date, in the case of proxy-related materials; and
(b) as at the date specified in the relevant request for beneficial ownership information, in the case of securityholder materials not sent in connection with ameeting.
(4) An intermediary may satisfy its obligation to send securityholder materials to an intermediary under this section by sending the securityholder materials to aperson or company designated by the intermediary as a person or company that will attend to the sending of the materials to appropriate beneficial owners withinthe time periods required by this section.
4.3 No Sending Securityholder Materials Against Instructions - Except as required by securities legislation, an intermediary that receives securityholdermaterials that are to be sent to a beneficial owner of securities shall not send the securityholder materials to the beneficial owner if the beneficial owner hasdeclined in accordance with this Instrument to receive those materials unless the reporting issuer has specified in the request for beneficial ownership informationsent under section 2.5 in connection with the sending of materials that the securityholder materials shall be sent to all beneficial owners of securities.(48)
4.4 Request for Voting Instructions - An intermediary that receives proxy-related materials that solicit votes or voting instructions from securityholders, forsending by the intermediary to beneficial owners of the securities, shall prepare and include with the proxy-related materials that it sends to the beneficial owners,in substitution for the proxy otherwise contained in the proxy-related materials, a request for voting instructions for the matters to which the proxy-relatedmaterials relate for return to the intermediary.
4.5 Tabulation and Execution of Voting Instructions - An intermediary shall
(a) tabulate voting instructions received from beneficial owners of securities in response to a request for voting instructions sent by the intermediary undersection 4.4; and
(b) for each beneficial owner, execute the voting instructions received from the beneficial owner to the extent that the intermediary holds a proxy directly givenby the registered holder, or indirectly given by the registered holder through one or more other proxy holders, in respect of the securities held by the intermediaryfor the beneficial owner.
PART 5 DEPOSITORIES
5.1 Intermediary Master List - A depository shall maintain a current register of intermediaries containing the information received by the depository fromintermediaries under section 3.1 and shall send a copy of that register to any new depository recognized under this Instrument.
5.2 Index of Meeting and Record Dates
(1) A depository shall maintain an index of meetings containing the information that it receives from reporting issuers under section 2.2.
(2) A depository shall arrange for the timely publication of the information it receives from a reporting issuer under section 2.2 in the national financial press andmay charge the reporting issuer a publication fee in a reasonable amount for the publication.
5.3 Depository Response to Intermediary Search Request by Reporting Issuer - Within two business days of its receipt of an intermediary search requestfrom a reporting issuer, a depository shall send to the reporting issuer a report that
(a) specifies the total number of securities of the reporting issuer of the series or class specified in the request that are registered in the name of the depository orin the names of nominees of the depository;
(b) specifies the total number of securities of the reporting issuer of the series or class specified in the request that are held on behalf of the depository by anotherperson or company and the identity of that other person or company;
(c) lists the names, addresses and respective holdings of participants in the depository of securities of the series or class specified in the request, on whose behalfthe depository holds securities; and
(d) contains a copy of the intermediary master list.
5.4 Depository to send Participant Omnibus Proxy to Reporting Issuer
(1) Within two business days after the beneficial owner determination date specified in the notice of meeting and record dates sent by a reporting issuer to adepository, the depository shall send to the reporting issuer a form of omnibus proxy(49), appointing each participant, on whose behalf, and to the extent that, thedepository holds, as of the beneficial owner determination date, securities that entitle the holder to vote at the meeting, as the depository's proxy holder in respectof the securities held by the depository on behalf of the participants.
(2) The depository shall send to each of the participants named in an omnibus proxy referred to in subsection (1), at the same time as the depository sends theomnibus proxy to the reporting issuer, confirmation of the proxy given by that depository.
PART 6 OTHER PERSONS OR COMPANIES(50)
6.1 Requests for NOBO Lists from a Reporting Issuer
(1) Any person or company may request a reporting issuer to send the most recently prepared NOBO lists, for each intermediary holding securities of thereporting issuer, that are in the reporting issuer's possession.
(2) A request for NOBO lists under this section shall be accompanied by a statutory declaration in the required form(51) of the person or company making therequest.
(3) A reporting issuer shall send the NOBO lists requested under this section, within three business days of the request, upon receipt of a fee for preparing thelists for sending under this section.
(4) A reporting issuer shall delete from NOBO lists sent under this section the FINS numbers referred to in the required form and any other information thatwould identify the intermediary through which a NOBO holds securities.
6.2 Other Rights and Obligations of Persons and Companies other than Reporting Issuers
(1) A person or company may take any action permitted under this Instrument to be taken by a reporting issuer and, in so doing, has all the rights, and is subjectto all of the obligations, of a reporting issuer in connection with that action.
(2) In connection with actions taken under subsection (1) by a person or company, references in this Instrument and the required forms to a "reporting issuer"shall be read as references to the person or company.
(3) Subsection (2) does not apply to sections 2.1, 2.2 and 2.18, subparagraph 4.1(2)(b)(ii), section 5.4 and this Part.
(4) A person or company that sends an intermediary search request under section 2.3 or a request for beneficial ownership information under section 2.5 shallconcurrently send a copy of that request to the reporting issuer of the securities to which the request relates.(52)
(5) A person or company other than a reporting issuer that makes an intermediary search request under section 2.3 or a request for beneficial ownershipinformation under section 2.5 shall provide a statutory declaration in the required form.(53)
PART 7 PROHIBITED USE
7.1 Use of NOBO List - No reporting issuer or other person or company shall use a NOBO list or a report prepared under section 5.3 relating to the reportingissuer and obtained under this Instrument, except in connection with
(a) sending securityholder materials to NOBOs in accordance with this Instrument;
(b) an effort to influence the voting of securityholders of the reporting issuer;
(c) an offer to acquire securities of the reporting issuer; or
(d) any other matter relating to the affairs of the reporting issuer.
7.2 Trafficking in Information Prohibited - Except as permitted by this Instrument, no reporting issuer or any other person or company shall offer for sale orsell or purchase or otherwise traffic in any information obtained under this Instrument.
PART 8 MISCELLANEOUS
8.1 Default of Party in Communication Chain - If a person or company fails to send information or materials in accordance with the requirements of thisInstrument, the person or company whose response or action is dependent upon receiving the information or materials shall use reasonable efforts to obtain theinformation or materials from the other person or company, and in so doing is exempt from the timing provisions of this Instrument in connection with theresponse or action to the extent that the delay arose from the failure of the other person or company.
8.2 Right to Proxy - Nothing in this Instrument shall be interpreted to restrict in any way
(a) a beneficial owner's right to demand and to receive from an intermediary a proxy enabling the beneficial owner to vote the securities; or
(b) the right of a depository or intermediary to vary an omnibus proxy in respect of securities to reflect a change in the registered or beneficial ownership of thesecurities.
PART 9 EXCEPTIONS AND EXEMPTIONS
9.1 Audited Annual Financial Statements or Annual Report - The time periods applicable to sending of proxy-related materials prescribed in this Instrumentdo not apply to the sending of the annual financial statements or annual report if the statements or report are sent by the reporting issuer to beneficial owners ofthe securities within the time limitations established in applicable corporate law and securities legislation for sending to registered holders of the securities.
9.2 Exemptions
(1) The regulator(54) or the securities regulatory authority may grant an exemption from this Instrument, in whole or in part, subject to such conditions orrestrictions as may be imposed in the exemption.
(2) Despite subsection (1), in Ontario only the regulator may grant such an exemption.
PART 10 EFFECTIVE DATES
10.1 Effective Date - This Instrument comes into force on January 1, 1999.
10.2 Sending of Proxy-Related Materials
(1) Proxy-related materials for a meeting held on or after January 1, 1999 and before October 1, 1999 shall be sent in accordance with NP41 as if NP41 were inforce in the local jurisdiction.
(2) This Instrument applies to the sending of proxy-related materials for a meeting held on or after October 1, 1999.
10.3 Sending of Other Securityholder Materials - This Instrument applies to the sending of securityholder materials other than proxy-related materials on orafter July 1, 1999.
10.4 NOBO Lists - No person or company shall request a NOBO list before July 1, 1999.(55)
APPENDIX A
FEE SCHEDULE
1. The fee referred to in section 2.13 is
(a) a reasonable amount;
(b) in British Columbia, $10 to each proximate intermediary to whom a request for beneficial ownership information is sent.
2. The fee referred to in paragraph 2.14(1)(a) is
(a) a reasonable amount; or
(b) in British Columbia $15.00 to each proximate intermediary to whom securityholder materials are sent, plus $1.00 for each NOBO that is to receive thesecurityholder materials.
3. The fee referred to in paragraph 2.14(2)(a) is
(a) a reasonable amount; or
(b) in British Columbia, $15.00 to each proximate intermediary to whom securityholder materials are sent, plus $1.00 for each OBO that is to receive thesecurityholder materials that declined to receive those materials.
4. The fee referred to in subsection 6.1(3) is
(a) a reasonable amount; or
(b) in British Columbia, $100 for all NOBO lists sent.
NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
EXPLANATION TO CLIENTS AND
CLIENT RESPONSE CARD
Note: Terms used in this Form have the meanings given to them in National Instrument 54-101. The use of this Form is referenced in sections 1.1, 1.4,3.2, 3.3, 3.4 and 3.5 of National Instrument 54-101.
EXPLANATION TO CLIENTS
[Letterhead of Intermediary]
Based on your instructions, the securities in your account with us are not registered in your name but in our name or the name of another person or companyholding your securities on our behalf. The issuers of the securities in your account may not know the identity of the beneficial owner of these securities.
We are required under securities law to obtain your instructions concerning various matters relating to your holding of securities in your account. We enclose aclient response card that allows you to provide us with those instructions. Please complete and return the client response card to us at your earliestconvenience. If you do not return the card or if you do not answer all of the questions on the card, you will be considered to have made certain choicesconcerning your rights relating to the securities in your account.
Disclosure of Beneficial Ownership Information
Securities law permits reporting issuers and other persons and companies to send materials related to the affairs of the reporting issuer directly to beneficialowners of the reporting issuer's securities if the beneficial owners do not object to having information about them disclosed to the reporting issuer or otherpersons and companies. Part 1 of the client response card allows you to tell us if you OBJECT to the disclosure by us to the reporting issuer or other persons orcompanies of your name, address, securities holdings and preferred language of communication.
If you OBJECT to the disclosure of this information by us, please mark the first box in Part 1 of the card. If you do this, all materials to be delivered to you as abeneficial owner of securities will be delivered by us. We are permitted to charge you the reasonable costs incurred by us in making those deliveries.
If you DO NOT OBJECT to the disclosure of that information, please mark the second box on Part 1 of the card. If you do not complete Part 1 of the cardor if you do not return the card to us or otherwise instruct us, then you will be considered to have consented to the disclosure of that information. Inthose circumstances, you will not be charged with any costs associated with sending securityholder materials to you.
Receiving Securityholder Materials
For securities that you hold through your account, you have the right to receive proxy-related materials sent to registered securityholders by reporting issuers inconnection with securityholder meetings. Among other things, this permits you to receive the necessary information to allow you to have your securities voted inaccordance with your wishes at a securityholder meeting.
In addition, reporting issuers may choose to send other securityholder materials to beneficial owners, although they are not obliged to do so.
Securities law permits you to decline to receive two types of these materials. The two types of material are:
(a) proxy-related materials that are sent in connection with a securityholder meeting at which only "routine" business is to be conducted. "Routine" businessmeans approval of minutes, consideration of financial statements and the auditors' report, election of directors, the setting or changing of the number of directorsto be elected in certain circumstances and reappointment of an incumbent auditor; and
(b) materials that a reporting issuer or other person or company sends to securityholders that are not required by corporate or securities law to be sent toregistered securityholders.
Part 2 of the client response card allows you to tell us what materials you wish to receive.
If you want to receive ALL materials sent to beneficial owners of securities, please mark the first box on Part 2 of the enclosed client response card. If you wantto DECLINE to receive the two types of materials referred to above, please mark the second box in Part 2 of the card. If you do not complete Part 2 of thecard, or if you do not return the card to us or otherwise instruct us, you will be considered to have chosen to DECLINE to receive the two types ofmaterials referred to above.
Even if you decline, or are considered to have declined, to receive the two types of materials referred to above, a reporting issuer or other person or company isentitled to deliver these materials to you, provided that the reporting issuer pays all costs associated with the sending of securityholder materials.
Preferred Language of Communication
Part 3 of the client response card allows you to tell us your preferred language of communication (English or French). You will receive materials in yourpreferred language of communication if the materials are available in that language.
If you do not complete Part 3 of the card, or if you do not return the card to us or otherwise instruct us, you will be considered to have chosen as yourpreferred language of communication the language that has been customarily used by us to communicate with you.
CONTACT
If you have any questions or want to change your instructions in the future, please contact [name] at [phone number] or [address, fax number and/or e-mailaddress].
CLIENT RESPONSE CARD
TO: [NAME OF INTERMEDIARY]
Account Number(s)
I have read and understand the explanation to clients that you have provided me in connection with this card and that the choices indicated by me apply to all ofthe securities held in the above account(s).
PART 1 - Disclosure of Beneficial Ownership Information
Please mark the corresponding box to show whether you OBJECT or DO NOT OBJECT to us disclosing your name, address, securities holdings andpreferred language of communication (English or French) to issuers of securities you hold with us and to other persons or companies in accordance withsecurities law. If you indicate that you OBJECT, we are entitled to charge you the reasonable costs incurred by us to forward securityholder materials to youin accordance with securities law. If you do not mark either box, or if you do not return this card to us or otherwise instruct us, you are considered to haveNOT OBJECTED to disclosure of the information concerning you.
I OBJECT to you disclosing the information described above.
I DO NOT OBJECT to you disclosing the information described above.
PART 2 - Receiving Securityholder Materials
Please mark the corresponding box to show whether you WANT to receive ALL materials sent to beneficial owners of securities or whether you DECLINE toreceive proxy-related materials for meetings at which only routine business is to be conducted and materials sent to securityholders that are not required bycorporate or securities law to be sent. If you do not mark either box, or if you do not return this card to us or otherwise instruct us, you are considered to haveDECLINED to receive those materials.
I WANT to receive ALL securityholder materials sent to beneficial owners of securities.
I DECLINE to receive proxy-related materials for meetings at which only routine business is to be conducted and materials sent to securityholdersthat are not required by corporate or securities law to be sent. Even if I decline, or am considered to decline, to receive these two types of materials, Iunderstand that a reporting issuer or other person or company is entitled to send these materials to me at their expense.
(Note that these instructions do not apply to any specific request you give or may have given to a reporting issuer concerning the sending of interim financialstatements of the reporting issuer.)
PART 3 - Preferred Language of Communication
Please mark the corresponding box to show your preferred language of communication. If you do not mark either box, or if you do not return this card to us orotherwise instruct us, you will be considered to have chosen as your preferred language of communication the language that has been customarily used by usto communicate with you.
ENGLISH
FRENCH
I understand that the materials I receive will be in my preferred language of communication if the materials are available in that language.
NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
REQUEST FOR BENEFICIAL OWNERSHIP INFORMATION
Note: Terms used in this Form have the meanings given to them in National Instrument 54-101.
The use of this Form is referenced in sections 1.1, 1.4, 2.5, 2.9, 2,10, 2.12, 2.13, 2.14, 3.7, 4.1, 4.2, 4.3 and 6.2 of National Instrument 54-101.
References in this Form should be amended as appropriate to refer to the person or company using this Form, in accordance with section 6.2 ofNational Instrument 54-101.
PART 1
REPORTING ISSUER INFORMATION
Item 1 - Name and address of the reporting issuer.
State the name and address of the reporting issuer.
Item 2 - Contact person(s)
State the name, address, telephone number, facsimile number and any electronic mail address of the contact person(s) of the reporting issuer, or of the reportingissuer's agent, if applicable, with whom an intermediary should deal.
State the billing address of the reporting issuer or of the reporting issuer's agent if different.
Item 3 - Name and ISIN(56) number of each class or series of securities to be searched
State the name and ISIN number of each class or series of securities of the reporting issuer for which information is requested.
Item 4 - Purpose of the request for beneficial ownership information
State whether the request is being made
(a) only for the purpose of obtaining NOBO lists or preliminary search information under subsection 2.5(2) of National Instrument 54-101, and not in connectionwith a meeting or sending securityholder materials;
(b) for the purpose of obtaining NOBO lists, and in connection with sending securityholder materials, but not in connection with a meeting;
(c) for the purpose of obtaining NOBO lists, and in connection with a meeting;
(d) in connection with sending securityholder materials, not in connection with a meeting, and without a NOBO list being requested; or
(e) in connection with a meeting, without NOBO lists being requested.
Item 5 - Information to be Included or Requested if Item 4(a) is Applicable
5.1 If NOBO lists are desired, request NOBO lists in either electronic or non-electronic forms, without FINS number information.
5.2 If the request is made to receive preliminary search information, request information on the number of OBOs and NOBOs of the reporting issuer, brokendown by those that have declined to accept materials to the extent permitted.
5.3 Specify the date as of which the NOBO lists or the preliminary search information are to be prepared.
5.4 If NOBO lists are requested, confirm that a statutory declaration of the reporting issuer in the form of Form 54-101F8 is enclosed or is being concurrentlyprovided with the request for beneficial ownership information.
Item 6 - Information to be Included or Requested if Item 4(b) is Applicable
6.1 Request NOBO lists in either electronic or non-electronic form, without FINS number information.
6.2 Provide an itemized list of the securityholder materials to be sent.
6.3 Indicate whether the securityholder materials are available in English or French only or in both English and French.
6.4 State whether the reporting issuer will send the materials directly to NOBOs or whether the reporting issuer will send the materials to the proximateintermediary for sending to NOBOs.
6.5 State the date at which information provided in response to the request, including the NOBO lists, is to be provided.
6.6 State the date when the reporting issuer anticipates that proximate intermediaries will receive the materials referred to in item 6.2.
6.7 State whether the materials are to be sent by first class mail to the beneficial securityholders and if not, state what method is to be used to send the materials.
6.8 Confirm that a statutory declaration of the reporting issuer in the form of Form 54-101F8 is enclosed or is being concurrently provided with the request forbeneficial ownership information.
6.9 If the securityholder materials are to sent to all beneficial securityholders, including beneficial securityholders that have declined to receive them, so state.
Item 7 - Information to be Included or Requested if Item 4(c) is Applicable
7.1 Request NOBO lists in either electronic or non-electronic form. If the reporting issuer will send proxy-related materials directly to NOBOs and seek votinginstructions from NOBOs, specify that the NOBO lists will include FINS number information. Otherwise, specify that the NOBO lists will exclude FINS numberinformation.
7.2 Provide an itemized list of the proxy-related materials to be sent.
7.3 Indicate whether the proxy-related materials are available in English or French only or in both English and French.
7.4 State whether the reporting issuer will send the materials directly to NOBOs or whether the reporting issuer will send the materials to the proximateintermediary for sending to NOBOs. If the reporting issuer will send materials directly to NOBOs, state whether the reporting issuer will be seeking votinginstructions from NOBOs in connection with the meeting.
7.5 State:
(a) the type of meeting (annual, special or annual and special) and whether only routine business is to be conducted at the meeting;
(b) the beneficial owner determination date of the meeting;
(c) the date, time and place of meeting; and
(d) the cut-off date and time for proxy receipt, if applicable.
7.6 State the name and ISIN number of each class or series of securities that carry the right to receive notice of the meeting or the right to vote at the meeting.
7.7 State that the information to be provided in response to the request, including the NOBO list, is to be provided as at the beneficial owner determination dateof the meeting.
7.8 State the date when the reporting issuer anticipates that proximate intermediaries will receive the materials referred to in item 7.2.
7.9 State whether the materials are to be sent by first class mail to the beneficial securityholders and if not, state what method is to be used to send the materials.
7.10 Confirm that a statutory declaration of the reporting issuer in the form of Form 54-101F8 is enclosed or is being concurrently provided with the request forbeneficial ownership information.
7.11 If the securityholder materials are to sent to all beneficial securityholders, including beneficial securityholders that have declined to receive them, so state.
Item 8 - Information to be Included or Requested if Item 4(d) is Applicable
8.1 Provide an itemized list of the securityholder materials to be sent.
8.2 Indicate whether the securityholder materials are available in English or French only or in both English and French.
8.3 State the date at which information provided in response to the request is to be provided.
8.4 State the date when the reporting issuer anticipates that proximate intermediaries will receive the materials referred to in item 8.1.
8.5 State whether the materials are to be sent by first class mail to the beneficial securityholders.
8.6 If the securityholder materials are to sent to all beneficial securityholders, including beneficial securityholders that have declined to receive them, so state.
Item 9 - Information to be Included or Requested if Item 4(e) is Applicable
9.1 Provide an itemized list of the proxy-related materials to be sent.
9.2 Indicate whether the proxy-related materials are available in English or French only or in both English and French.
9.3 State:
(a) the type of meeting (annual, special or annual and special) and whether only routine business is to be conducted at the meeting;
(b) the beneficial owner determination date of the meeting;
(c) the date, time and place of meeting; and
(d) the cut-off date and time for proxy receipt, if applicable.
9.4 State the name and ISIN number of each class or series of securities that carry the right to receive notice of the meeting or the right to vote at the meeting.
9.5 State that the information to be provided in response to the request is to be provided as at the beneficial owner determination date of the meeting.
9.6 State the date when the reporting issuer anticipates that proximate intermediaries will receive the materials referred to in item 9.1.
9.7 State whether the materials are to be sent by first class mail to the beneficial securityholders and, if not, state what method is to be used to send the materials.
9.8 If the securityholder materials are to sent to all beneficial securityholders, including beneficial securityholders that have declined to receive them, so state.
Part 2
PROXIMATE INTERMEDIARY RESPONSE
Item 1 - Name and address of proximate intermediary
State the name and address of the proximate intermediary.
Item 2 - Contact person
State the name, telephone number, fax number and any electronic mail address of the contact person(s) of the proximate intermediary, or of the proximateintermediary's agent, if applicable, with whom the reporting issuer should deal.
Item 3 - Consolidation of replies
If applicable, provide a list of all nominees and other intermediaries in whose names securities of clients of the proximate intermediary are registered and thenumber and class of securities held by each such person or company and confirm that the information provided in the response includes securities held throughthose nominees and other intermediaries holding, directly or indirectly, through the proximate intermediary.
Item 4 - Address for receipt of materials
If the request for beneficial ownership information was made either in connection with sending securityholder materials apart from a meeting, or in connectionwith a meeting, provide, if different from the information provided under Item 2, the name and municipal address to which the materials are to be sent forforwarding by the intermediary to beneficial owners or other intermediaries.
Also provide the name, telephone number, fax number and any electronic mail address of the contact person at that address if different from the informationprovided under Item 2.
Item 5 - Number of sets of materials required for forwarding by proximate intermediary to beneficial owners
Unless the request for beneficial ownership information was made only to obtain NOBO lists, state the number, including the number required in each case inEnglish and French, of materials specified in Part 1 of this form required for forwarding by the proximate intermediary to beneficial owners.
Item 6 - Preliminary Search Information
If the request for beneficial ownership information was made to receive preliminary search information under Item 5.2 of the request, provide information on thenumber of OBOs and NOBOs of the reporting issuer, broken down by those who have declined to receive materials to the extent permitted.
Item 7 - NOBO Lists
If NOBO lists were requested by the reporting issuer, enclose them with this response or, if they were requested in electronic form, confirm that the proximateintermediary shall send it electronically in the form of Form 54-101F5. Unless the request for beneficial ownership information stated that the request was beingmade for the purpose of obtaining NOBO lists and in connection with a meeting where the reporting issuer would be sending materials to NOBOs and seekingvoting instructions from NOBOs, exclude from the NOBO list the FINS number information.
Item 8 - Confirmation of the search
Confirm the completeness and accuracy of the foregoing information on behalf of [name of proximate intermediary].
NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
FORM 54-101F3
OMNIBUS PROXY (DEPOSITORIES)
Note: Terms used in this Form have the meanings given to them in National Instrument 54-101.
The use of this Form is referenced in sections 1.1, 1.4, 2.3, 5.4 and 8.2 of National Instrument 54-101.
[Letterhead of Depository]
OMNIBUS PROXY
Subject to the paragraph that follows, [the undersigned], being a registered holder or proxy holder in respect of securities of the reporting issuer named below,hereby appoints each of the persons or companies identified in the attached schedule, in respect of the corresponding securities referred to below, with power ofsubstitution in each, to attend, vote and otherwise act for and on behalf of [the undersigned] to the extent of the number of securities specified, in respect of allmatters that may come before the meeting of securityholders described below, and at any adjournment or continuance thereof.
The appointees shall not vote, or give a proxy requiring or authorizing a nominee to vote, the securities represented by this omnibus proxy except in accordancewith voting instructions received from the beneficial owners whose securities are represented by this omnibus proxy or in accordance with other legal authorityto vote the securities, and only to the extent that the securities are registered in the name of [the undersigned] holds a proxy and held on behalf of the appointeeon the beneficial owner determination date, and only in accordance with securities legislation.
This instrument supersedes and revokes any prior appointment of proxy made by [the undersigned] with respect to the voting of the securities specified below atsuch meeting, or at any adjournment thereof.
Reporting issuer:
Class/Series of Security:
ISIN Number:
Number of Securities:
Date of Meeting:
Beneficial Owner Determination Date:
Schedule to Form 54-101F3
[Letterhead of Depository]
SCHEDULE TO OMNIBUS PROXY
Participant Security Positions
Reporting issuer:
ISIN Number:
Date Schedule Prepared:
Participant Total Number of Securities of the relevant class or series
[Name/address of participant] [position held by participant]
[Name/address of participant] [position held by participant]
[Name/address of participant] [position held by participant]
Total Number of Securities held by Participants for the relevant class or series [Total]
NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
FORM 54-101F4
OMNIBUS PROXY (INTERMEDIARIES)
Note: Terms used in this Form have the meanings given to them in National Instrument 54-101.
The use of this Form is referenced in sections 1.1, 1.4, 4.1 and 8.2 of National Instrument 54-101.
[Letterhead of Intermediary]
OMNIBUS PROXY
Subject to the paragraph that follows, [the undersigned], being a registered holder or proxy holder in respect of securities of the reporting issuer named below,hereby appoints [insert names from reporting issuer's management proxy], with power of substitution, to attend, vote and otherwise act for and on behalf of [theundersigned] to the extent of the number of securities specified, in respect of all matters that may come before the meeting of securityholders described below,and at any adjournment or continuance.
The appointees shall not vote, or give a proxy requiring or authorizing a nominee to vote, the securities represented by this omnibus proxy except in accordancewith voting instructions received from the beneficial owners whose securities are represented by this omnibus proxy or in accordance with other legal authorityto vote the securities, and only to the extent that the securities are registered in the name of [the undersigned] or that [the undersigned] holds a proxy and held onbehalf of the beneficial owners on the beneficial owner determination date, and only in accordance with securities legislation.
This instrument supersedes and revokes any prior appointment of proxy made by [the undersigned] with respect to the voting of the securities specified below atsuch meeting, or at any adjournment thereof.
Reporting issuer:
Class/Series of Security:
ISIN Number:
Number of Securities:
Name of Registered Holder of Securities:
Date of Meeting:
Beneficial Owner Determination Date: NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
FORM 54-101F5
ELECTRONIC FORMAT FOR NOBO LIST
Note: Terms used in this Form have the meanings given to them in National Instrument 54-101.
The use of this Form is referenced in sections 1.1, 1.4, 2.5, 2.9, 2.10, 2.11, 4.1, 6.1, 7.1 and 10.4 of National Instrument 54-101.
| HEADER RECORDDESCRIPTION | TYPE | LENGTH | COMMENTS |
| RECORD TYPE
FINS NUMBER ISIN1 JOB NUMBER SECURITY DESC. RECORD DATE CREATION DATE FILLER |
A
A A N A N N A |
1
4 9 6 32 6 5 255 |
Header record = A
Not used Format YYMMDD Format YYDDD Not used |
| TRAILER RECORDDESCRIPTION | TYPE | LENGTH | COMMENTS |
| RECORD TYPE
FINS NUMBER ISIN1 JOB NUMBER TOTAL SHAREHOLDERS TOTAL SHARES FILLER |
A
A A N N N A |
1
4 9 6 7 11 280 |
Trailer record = C
Not used Number of ""B type records Total shares on ""B records Not used |
| DETAIL RECORD DESCRIPTION | TYPE | LENGTH | COMMENTS |
| RECORD TYPE
FINS NUMBER ISIN1 JOB NUMBER ACCOUNT NUMBER NAME ADDRESS POSTAL CODE POSTAL REGION GEOGRAPHICAL REGION LANGUAGE CODE NUMBER OF SHARES RECEIVE ALL MATERIAL |
A
A A N A A A A A A A N A A |
1
4 9 6 20 32 32 9 1 2 1 9 1 |
Detail Record = B
Not used Occurs 7 times C-Canada; U-USA; F-Foreign; H-HandDeliver Not used E-English; F-French Shareholder Position Y/N |
1 ISIN" means International Stock Identification Number.
NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
FORM 54-101F6
REQUEST FOR VOTING INSTRUCTIONS MADE BY REPORTING ISSUER
Note: Terms used in this Form have the meanings given to them in National Instrument 54-101.
The use of this Form is referenced in sections 1.1, 1.4, 2.17 and 2.18 of National Instrument 54-101.
References in this Form should be amended as appropriate to refer to the person or company using this Form, in accordance with section 6.2 ofNational Instrument 54-101.
[Letterhead of Reporting issuer]
REQUEST FOR VOTING INSTRUCTIONS
To our securityholders:
We are sending to you the enclosed proxy-related materials that relate to a meeting of the holders of the series or class of securities that are held on your behalfby an intermediary or depository. Your securities can be voted only by management, as proxy holder of the registered holder, in accordance with yourinstructions.
We are prohibited from voting your securities on any of the matters to be acted upon at the meeting without your specific voting instructions. In orderfor your securities to be voted at the meeting, it will be necessary for us to have your specific voting instructions. Please complete and return the attachedform to provide your voting instructions to us promptly in the return envelope provided. [It is understood that, if you return without otherwise marking the form,the securities will be voted as recommended by the board of directors on all matters to be considered at the meeting.]
Should you wish to attend the meeting and vote in person, please write your name in the place provided for that purpose in the voting instructions form providedto you. If you require assistance in that regard, please contact [the undersigned].
[Insert intermediary name, code or identifier; name, address and respective holdings of securities of the relevant series or class held for the NOBO.]
[Insert description of proposals to be voted upon, other instructions or explanations, etc.]
By providing voting instructions as requested, you are acknowledging that you are the beneficial owner of, and are entitled to instruct us with respect to thevoting of, these securities.
(If these voting instructions are given on behalf of a body corporate set out the full legal name of the body corporate and address for service of the bodycorporate.)
NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
FORM 54-101F7
REQUEST FOR VOTING INSTRUCTIONS MADE BY INTERMEDIARY
Note: Terms used in this Form have the meanings given to them in National Instrument 54-101.
The use of this Form is referenced in sections 1.1, 1.4, 4.4 and 4.5 of National Instrument 54-101.
References in this Form should be amended as appropriate to refer to the person or company using this Form, in accordance with section 6.2 ofNational Instrument 54-101.
[Letterhead of Intermediary]
REQUEST FOR VOTING INSTRUCTIONS
To our clients:
We are sending to you the enclosed proxy-related materials that relate to a meeting of the holders of securities of the series or class held by us in your accountbut not registered in your name. Your securities can be voted only by us, as registered holder or proxy holder of the registered holder, in accordance with writteninstructions from the beneficial owner.
We are prohibited from voting your securities on any of the matters to be acted upon at the meeting without your specific voting instructions. In orderfor your securities to be voted at the meeting, it will be necessary for us to have your specific voting instructions. Please complete and return the attachedform to provide your voting instructions to us promptly in the return envelope provided. [It is understood that, if you return without otherwise marking the form,the securities will be voted as recommended by the management of the reporting issuer on all matters to be considered at the meeting.]
Should you wish to attend the meeting and vote in person, please write your name in the place provided for that purpose in the voting instructions form providedto you. If you require assistance in that regard, please contact [the undersigned].
[Insert intermediary name, code or identifier; name, address and respective holdings of securities of the relevant series or class held for the NOBO.]
[Insert description of proposals to be voted upon, other instructions or explanations, etc.]
By providing voting instructions as requested, you are acknowledging that you are the beneficial owner of, and are entitled to instruct us with respect to thevoting of, these securities.
(If these voting instructions are given on behalf of a body corporate set out the full legal name of the body corporate and address for service of the bodycorporate.)
NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
FORM 54-101F8
STATUTORY DECLARATION
Note: Terms used in this Form have the meanings given to them in National Instrument 54-101.
The use of this Form is referenced in sections 1.4, 2.5, 6.1 and 6.2 of National Instrument 54-101.
[Securities Act]
IN THE MATTER OF NATIONAL INSTRUMENT 54-101
CANADA
PROVINCE OF
COUNTY, DISTRICT OR MUNICIPALITY OF:
I, ,
(Name in full)
,
(Full Residence Address)
(If this undertaking is made on behalf of a body corporate, set out the full legal name of the body corporate, position of person signing on behalf of the bodycorporate and address for service of the body corporate).
SOLEMNLY DECLARE AND UNDERTAKE THAT:
1. [in the case of intermediary search requests or requests for beneficial ownership information] I require information concerning the securityholders of [insertname of the reporting issuer].
2. [in the case of requests for NOBO lists] I require lists in the required format of the non-objecting beneficial owners of securities of [insert name of thereporting issuer] on whose behalf intermediaries hold securities, as shown on the records of the intermediaries.
3. I undertake that the information requested will be used only in connection with
(a) the sending of securityholder materials to [NOBOs] [beneficial securityholders] in accordance with National Instrument 54-101;
(b) an effort to influence the voting of securityholders of the reporting issuer;
(c) an offer to acquire securities of the reporting issuer; or
(d) any other matter relating to the affairs of the reporting issuer.
4. Any securityholder materials sent by the undersigned shall include the following statement:
"These securityholder materials are being sent to both registered and non-registered owners of the securities. The names and addresses of owners of thesecurities that are not registered holders, and disclosure of their holdings of securities, have been obtained from intermediaries holding on behalf of the ownersunder applicable securities regulatory requirements."
AND I make this solemn declaration conscientiously believing it to be true, and knowing that it is of the same force and effect as if made under oath.
Declared before me
at
Signature this day of , 1998.
(A Commissioner, etc.)
COMPANION POLICY 54-101CP
TO NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
TABLE OF CONTENTS
PART TITLE
PART 1 BACKGROUND
1.1 History
1.2 Fundamental Principles
PART 2 GENERAL
2.1 Application of Instrument
2.2 Application to Foreign Securityholders and U.S. Issuers
2.3 Interim Financial Statements
2.4 "Client" and "Intermediary" to be Distinguished From "Beneficial Owner"
2.5 Definition of "Corporate Law"
PART 3 REPORTING ISSUERS
3.1 Timing for Notice of Meeting and Record Dates and Intermediary Searches
3.2 Fees
3.3 Adjournment or Change in Meeting
3.4 Provision of NOBO List to Another Party
3.5 Voting Instructions
3.6 Depository's Index of Meetings
PART 4 INTERMEDIARIES
4.1 Client Response Card
4.2 Separate Accounts
4.3 Reconciliation of Positions
4.4 Identification of Intermediary
4.5 Incomplete or Late Deliveries
PART 5 MEANS OF SENDING
5.1 General
5.2 Materials in Bulk for Sending to Beneficial Owners
5.3 Number of Sets of Materials
5.4 Electronic Communication
PART 6 EXEMPTIONS
6.1 Materials Sent Less Than 21 Days Before Meeting
6.2 Delay of Audited Annual Financial Statements or Annual Report
6.3 Additional Costs If Time Limitations Shortened
6.4 Applications
PART 7 LIABILITY
7.1 Liability
PART 8 APPENDIX A
8.1 Appendix A
COMPANION POLICY 54-101CP
TO NATIONAL INSTRUMENT 54-101
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER
PART 1 BACKGROUND
1.1 History
(1) Obligations imposed on reporting issuers under corporate law and securities legislation to communicate with securityholders are typically cast as obligationsin respect of registered holders and not in respect of beneficial owners. For purposes of market efficiency, securities are increasingly not registered in the namesof the beneficial owners but rather in the name of depositaries, or their nominees, who hold on behalf of intermediaries, such as dealers, trust companies or banks,who in turn hold on behalf of the beneficial owners.
(2) To address concerns that beneficial owners of securities of reporting issuers who hold their securities through intermediaries or their nominees may notreceive the information and the materials that enable them to exercise their right to vote that corporate law and securities legislation require reporting issuers tosend to their registered holders, the CSA approved in 1987 National Policy Statement No. 41 ("NP41"), which has been replaced by National Instrument 54-101(the "Instrument").
(3) The purpose of this Policy is to state the views of the Canadian securities regulatory authorities on various matters relating to the Instrument in order toprovide guidance and interpretation to market participants in the practical application of the Instrument.
1.2 Fundamental Principles - The following fundamental principles have guided the preparation of the Instrument:
(a) all securityholders of a reporting issuer, whether registered holders or beneficial owners, should have the opportunity to be treated alike as far as ispracticable;
(b) efficiency should be encouraged; and
(c) the obligations of each party in the securityholder communication process should be equitable and clearly defined.
PART 2 GENERAL
2.1 Application of Instrument
(1) The securityholder communication procedures contemplated by the Instrument are applicable to all securityholder materials sent by reporting issuers toholders of its securities under Canadian securities legislation including, but not limited to, proxy-related materials. Securityholder materials include materialsrequired by securities legislation or applicable corporate law to be sent to registered holders of securities of a reporting issuer, such as interim financialstatements, takeover bid circulars and directors circulars. Securityholder materials can also include materials sent to registered holders absent any legalrequirement to do so; an example of these types of materials would be non-legal corporate communications.
(2) As provided in section 2.7 of the Instrument, compliance with the procedures set out in the Instrument is mandatory for reporting issuers for sendingproxy-related materials to beneficial owners, and, under section 2.8 of the Instrument, is optional for the sending of other materials. Once a reporting issuerchooses to use the communications procedures specified in the Instrument, depositaries, intermediaries and other persons or companies are subject to therespondent obligations under the Instrument.
2.2 Application to Foreign Securityholders and U.S. Issuers
(1) As provided in subsection 2.12(3) of the Instrument, a reporting issuer that is precluded from sending proxies directly to NOBOs because of conflicting legalrequirements in the United States or elsewhere outside of Canada may choose to send the proxies and other proxy-related materials indirectly, i.e., by forwardingthe materials to NOBOs through proximate intermediaries for those securities.
(2) National Instrument 71-101 The Multi-Jurisdictional Disclosure System provides that a "U.S. issuer", as defined in that Instrument, is considered to satisfythe requirements of the Instrument, other than in respect of fees, if the issuer complies with the requirements of Rule 14a-13 under the 1934 Act for anyCanadian clearing agency and any intermediary whose last address as shown on the books of the issuer is in the local jurisdiction. Those requirements aredesigned to achieve the same purpose as the requirements of the Instrument.
(3) A Canadian reporting issuer may be exempt from complying with U.S. requirements under a reciprocal provision in the U.S. Multijurisdictional Disclosureregime.
2.3 Interim Financial Statements - Interim financial statements sent to beneficial owners in accordance with National Instrument 54-102 Supplemental MailingList and Interim Financial Statement Exemption will be "securityholder materials" under the Instrument. However, the sending of those financial statementsunder National Instrument 54-102 will not use the mechanisms of the Instrument as the reporting issuer will send them directly to persons on a supplementalmailing list.
2.4 "Client" and "Intermediary" to be Distinguished From "Beneficial Owner"
(1) Section 1.1 of the Instrument distinguishes between "client" and "beneficial owner". The two definitions recognize that, for many reporting issuers, there maybe layers of intermediaries between the registered holder of a security and the ultimate beneficial owner. For example, a dealer could hold an account on behalf ofanother dealer that in turn holds the account of the beneficial owner.
(2) In the Instrument, "beneficial owner" refers to a person that ultimately, has the right to vote, or exercise control or direction over, the securities that are heldthrough intermediaries and that therefore originates the instructions that are contained in a client response card, or that would have the authority to originatethose instructions. If an intermediary has discretionary authority over the securities, and consequently has authority to provide instructions in a client responsecard, it will be the beneficial owner of those securities for purposes of the Instrument and would not also be an "intermediary" with respect to those securities.
(3) The term "client" refers to the person or company for whom an intermediary directly holds securities, regardless of whether the client is a beneficial owner.So, if a dealer holds securities on behalf of a bank that in turn holds the securities on behalf of the beneficial owner, the bank is a client of the dealer, and thebeneficial owner is a client of the bank. The beneficial owner is not a client of the dealer. It is noted that section 1.3 of the Instrument provides that, under theInstrument, an intermediary may "hold" securities for a client, even if another person or company is shown on the register of the reporting issuer or the records ofanother intermediary as the holder of the securities.
2.5 Definition of "Corporate Law" - Section 1.1 of the Instrument defines "corporate law" as any legislation, constating instrument or agreement that governsthe affairs of a reporting issuer. It is noted that this definition would include Canadian or foreign laws, and, in the case of a trust, the declaration or deed of trustor other instrument under which the trust was created, and in the case of a partnership, the partnership agreement.
PART 3 REPORTING ISSUERS
3.1 Timing for Notice of Meeting and Record Dates and Intermediary Searches
(1) Section 2.2 of the Instrument requires that before the record date for notice, a reporting issuer send a notification of meeting and record dates, and section2.5 of the Instrument requires that before the record date for notice, a reporting issuer send a request for beneficial ownership information to proximateintermediaries. No specific time requirements are included in the Instrument for these actions. However, reporting issuers must commence the notice and searchreferred to in sections 2.2 and 2.5 in sufficient time to allow the completion of all steps and actions required before the sending of materials, including allowingfor the response time permitted for intermediaries in section 4.1 and depositories in section 5.3, so that the materials may be sent within the times contemplatedby sections 2.9 and 2.12 of the Instrument. It remains the reporting issuer's responsibility when planning a meeting timetable to factor in all timing considerations,including deadlines external to the Instrument. For example, reporting issuers that have obligations under corporate law to advertise in advance a record date fornotice or satisfy other publication obligations would need to comply with those obligations. Reporting issuers that intend to satisfy their advance publicationobligation by relying upon CDS's publication of meeting and record dates under subsection 5.2(2) of the Instrument would need to factor in the schedule ofCDS's publication and the advance notice required by CDS, as described in section 3.6 of this Policy, in order to permit inclusion of meeting and record dateinformation in the publication. Reporting issuers would also need to factor in the time needed to produce the relevant securityholder materials after quantities hadbeen determined.
(2) Proximate intermediaries are required under section 4.1 of the Instrument to furnish the information requested in a request for beneficial ownershipinformation, in certain circumstances, within three business days of receipt. It should be noted that this timing refers to receipt by the proximate intermediary,which may not be the same date as the request was sent by the reporting issuer. The time necessary for a request for beneficial ownership information to bereceived by a proximate intermediary should be factored into a reporting issuer's planning.
3.2 Fees - The fee schedule to the Instrument requires payment of fees in a reasonable amount, or in the case of British Columbia, a fixed amount. The CSAconsider that the fees fixed by British Columbia are reasonable, in light of the current procedures and technology.
3.3 Adjournment or Change in Meeting
(1) Section 2.15 of the Instrument requires reporting issuers that are required to give notice of adjournment or other change for a meeting to send notice of thechange to the persons listed in subsection 2.2(1) of the Instrument, the proximate intermediaries and to the persons and companies to whom the original notice ofmeeting was given. Issuers are reminded of a number of the implications of the requirement to send the notice of adjournment to the persons and companies whoreceived the original notice.
(2) If new proxy-related materials are sent in connection with the meeting, in addition to those previously sent, a new intermediary search may be required if thebeneficial owner determination date for the meeting is changed.
(3) New intermediary searches may have to be conducted if the nature of the business to be transacted at the meeting is materially changed. For example, if thenature of the business is changed to add business that is not routine business, it may be necessary to conduct new intermediary searches in order to ensure thatbeneficial owners that had elected not to receive proxy-related materials for meetings at which only routine business was to be conducted receive proxy-relatedmaterials for the meeting.
(4) If the adjournment or other change to the business of the meeting requires that new proxy-related materials be sent to shareholders, the meeting date or thedate of the adjourned meeting may have to be delayed to satisfy the time periods specified in the Instrument, unless an exemption from the time periods of theInstrument is obtained. If the change in the business of the meeting is significant, such as a change from only routine business to special business, it is expectedthat exemptions from timings for sending proxy-related materials will not generally be granted in the absence of exceptional circumstances.
3.4 Provision of NOBO List to Another Party
(1) Section 6.1 of the Instrument permits any person or company to request existing NOBO lists in the possession of the reporting issuer.
(2) Section 6.2 of the Instrument permits any person or company to take any action that a reporting issuer may take under this Instrument, except for actionsrelating specifically to the calling of meetings and the obtaining of voting instructions through omnibus proxies provided to management of the reporting issuer.This section would permit, for example, a person or company to make an intermediary search request, a request for beneficial ownership information and todistribute materials to securityholders in the same manner as reporting issuers. The person or company is responsible for taking all the required steps inconnection with any action, without having to deal with the relevant reporting issuer, but must provide the reporting issuer with a copy of an intermediary searchrequest or a request for beneficial ownership information sent under the Instrument.
3.5 Voting Instructions - Voting instructions received from NOBOs that the reporting issuer requests directly from the NOBOs will be returned directly to thereporting issuer who will vote the securities in accordance with instructions received from the NOBOs. In that case, the management of the reporting issuer willvote the securities beneficially owned by NOBOs in accordance with the instructions received from NOBOs to the extent that management has the correspondingproxy. That proxy is given to management by the proximate intermediary that provides the NOBO list under subsection 4.1(2) of the Instrument.
3.6 Depository's Index of Meetings - The index referred to in section 5.2 of the Instrument is currently published in the Monday edition of The Globe and MailReport on Business and in the Tuesday edition of La Presse. Notices of meetings received by CDS by noon on Wednesday is usually published in The Globe andMail on the following Monday and in La Presse on the following Tuesday. A reporting issuer should contact CDS or its transfer agent for current forms and feeschedules of CDS.
PART 4 INTERMEDIARIES
4.1 Client Response Card - By completing a client response card as provided in Part 3 of the Instrument, a beneficial owner gives notice of its choicesconcerning the receipt of materials and the disclosure of ownership information concerning it. The Canadian securities regulatory authorities note that a beneficialowner may, by written notice to the intermediary through which it holds, revoke any prior instructions given in a client response card.
4.2 Separate Accounts - A client that wishes to have certain of its securities receive different treatment under the Instrument should hold the securities inseparate accounts.
4.3 Reconciliation of Positions
(1) The records of an intermediary will, under the Instrument, require the intermediary to be able to identify which of its clients are NOBOs, OBOs or otherintermediaries, and specify the holdings of each of those clients.
(2) In order that the Instrument work properly, it is important that the records of an intermediary concerning the matters referred to in subsection (1) reconcileproperly with the records of the person or company through whom the intermediary itself holds the securities, which could either be another intermediary or adepository, or the security register of the relevant issuer, if the intermediary was a registered securityholder.
(3) A proximate intermediary, for instance, should not respond to a request for beneficial ownership information by providing security position informationconcerning NOBOs, that, together with the security positions of OBOs of the proximate intermediary, other intermediaries holding through the proximateintermediary and the security position of the proximate intermediary itself for securities that it holds as principal, exceed the total security holdings of theproximate intermediary as shown on the register of the issuer or in the records of the depository.
(4) It is important as well that the total number of votes cast at a meeting by an intermediary or persons holding through an intermediary not exceed the numberof votes for which the intermediary itself has a proxy.
4.4 Identification of Intermediary - Identification of the intermediary and the holdings specified in the corresponding NOBO list on requests for votinginstructions as required in Form 54-101F6 is necessary for the reporting issuer to be able to reconcile voting instructions received from a NOBO to thecorresponding position registered in the name of the intermediary or its nominee or in respect of which the intermediary holds a proxy. In addition, should aNOBO wish to change its voting instructions, before or at a meeting of securityholders, knowledge of the corresponding intermediary and the NOBO's holdingsis necessary.
4.5 Incomplete or Late Deliveries - If sets of materials are incomplete or received after the prescribed time limits, the intermediary should advise the reportingissuer and request instructions.
PART 5 MEANS OF SENDING
5.1 General - Depositaries, reporting issuers and intermediaries should use the most efficient means of sending information or securityholder material under theInstrument, including, if practicable, sending materials in bulk.
5.2 Materials in Bulk for Sending to Beneficial Owners - Securityholder materials sent by reporting issuers to proximate intermediaries for sending tobeneficial owners should be in uncollated bulk form. All materials forming part of a set to be delivered to securityholders should be delivered to proximateintermediaries together. The proximate intermediary will collate the materials, add its own request for voting instructions form if proxy-related materials are to besent to beneficial owners and place the materials into the intermediary's own envelopes for sending to beneficial owners.
5.3 Number of Sets of Materials - The number of sets of materials specified for forwarding to OBOs in a response to a request for beneficial ownershipinformation by a proximate intermediary is not intended to include sets of materials to be forwarded to NOBOs directly by the reporting issuer.
5.4 Electronic Communication
(1) It is expected that most communication for the purposes of the Instrument between or among depositaries, reporting issuers and intermediaries will be byelectronic means as far as practicable, including fax, e-mail or data transfer. The Instrument is intended by the CSA to promote and facilitate the use of electroniccommunication, subject to the current limits of both technology and applicable corporate law and securities legislation.
(2) Canadian securities legislation in certain jurisdictions, such as section 79 of the Securities Act (Alberta) and section 49 of the Securities Act (Ontario),requires written voting instructions. Certain securities regulatory authorities have granted exemptions in the past from these requirements for written votinginstructions, in order to permit voting instructions to be sent by telephone in specified circumstances. The securities regulatory authorities are prepared toconsider other applications for similar exemptions in appropriate cases, in order to permit voting instructions to be sent by telephone, through the Internet or byother electronic means, so long as appropriate safeguards are established to ensure valid and accurate instructions are obtained and supported by appropriaterecords.
(3) The Instrument no longer requires manual signatures to documents. While manual signatures are permitted and may be included, the CSA are of the view thatif the Instrument is intended to promote and facilitate the use of electronic communication, the obligation to include manual signatures would impede thepromotion of this technology. Accordingly, except for the continued obligation for manual signatures to statutory declarations, the Instrument does not requirethe authentication of documents by manual signature, and persons or companies should satisfy themselves as to the authenticity of instructions or othercommunications received in electronic form.
PART 6 EXEMPTIONS
6.1 Materials Sent Less Than 21 Days Before Meeting - In the absence of extraordinary circumstances, the Canadian securities regulatory authorities willgenerally not consider shortening the 21-day period referred to in sections 2.9 and 2.12 of the Instrument to a shorter period for the sending of proxy-relatedmaterials to beneficial owners of securities.
6.2 Delay of Audited Annual Financial Statements or Annual Report - Applicable corporate law or securities legislation may permit a reporting issuer tosend its audited annual financial statements or annual report to registered holders of its securities later than other proxy-related materials. Reporting issuers areencouraged to send their audited annual financial statements or annual report at the same time as proxy-related materials.
6.3 Additional Costs If Time Limitations Shortened - Section 4.2 of the Instrument allows a proximate intermediary three business days to prepare thesecurityholder materials for forwarding to beneficial owners after its receipt of the materials in bulk. If reporting issuers make arrangements with intermediariesto comply with the procedures in the Instrument within shorter time limits, the arrangements may provide for recovery by the intermediary of reasonable costsattributable to the shorter time limits that it would not otherwise have incurred (e.g., courier, long distance telephone calls, overtime).
6.4 Applications - Applicants should be aware that substantial exemptions from the requirements of the Instrument are expected to be granted infrequently.Exemptions to the predecessor policy statement to the Instrument that were granted typically involved reporting issuers that were incorporated or organizedoutside of Canada, with only an insignificant connection to Canada in terms of the percentage of its securityholders that were resident in Canada and thepercentage of its securities that were held by those securityholders, and if the reporting issuers have also been subject to requirements imposed by securities orcorporate legislation outside of Canada that serve to ensure that beneficial owners receive a comparable level of communication from the issuer.
PART 7 LIABILITY
7.1 Liability - Market participants are reminded that use of a NOBO list contrary to section 7.1 of the Instrument will constitute breach of the Instrument andsecurities legislation, and consequently, the action will be punishable in accordance with securities legislation.
PART 8 APPENDIX A
8.1 Appendix A - This Companion Policy contains, as Appendix A, a flow chart outlining the process prescribed by the Instrument that relate to proxy-relatedmaterials.
Click Here To See a Larger Image ofProxy Solicitation under NI-54-101.
1. (1998), 21 OSCB 1388.
2. In Ontario, at (1998), 21 OSCB 1388.
3. (1998), 21 OSCB 1388.
4. This Instrument is based on National Policy Statement No. 41 ("NP41"). This Instrument is expected to be adopted as a rule in British Columbia, Alberta,Manitoba, Ontario and Nova Scotia, as a Commission regulation in Saskatchewan, and as a policy in all other jurisdictions represented by the CanadianSecurities Administrators ("CSA").
Earlier versions of this Instrument (the "February Draft") and the related Forms and Companion Policy were published for comment in February 1998. Theseversions reflect the consideration of the CSA of comments received on the February 1998 drafts.
5. A national definition instrument has been adopted as National Instrument 14-101 Definitions. It contains definitions of terms used in more than one nationalinstrument. National Instrument 14-101 also provides that a term used in a National Instrument and defined in the statute relating to securities of the applicablejurisdiction, the definition of which is not restricted to a specific portion of the statute, will have the meaning given to it in that statute, unless the contextotherwise requires. National Instrument 14-101 also provides that a provision or a reference within a provision of a national instrument that specifically refers byname to a jurisdiction, other than a local jurisdiction, shall not have any effect in the local jurisdiction, unless otherwise stated in the provision.
6. The term "Canadian securities legislation" is defined in National Instrument 14-101 Definitions as meaning the statutes and other legislative instruments setout in an appendix to that instrument and will generally include the statute, regulations and, in some cases, rules, forms, rulings and orders relating to securities.
7. The term "local jurisdiction" is defined in National Instrument 14-101 Definitions. The definition is "in a national instrument adopted or made by a Canadiansecurities regulatory authority, the jurisdiction in which the Canadian securities regulatory authority is situate".
8. See Form 54-101F1.
9. The term "securities regulatory authority" is defined in National Instrument 14-101 Definitions as meaning, for a local jurisdiction, the securities commissionor similar regulatory authority set out in an appendix to that instrument opposite the name of the local jurisdiction.
10. See Form 54-101F1.
11. Paragraph (c) has been added to this Instrument in response to a comment received on the February Draft in order to ensure that persons or companiesholding securities on behalf of others and that have discretionary authority over those securities not be considered intermediaries under this Instrument. Personsor companies that have discretionary authority over the securities, and thus have authority to provide instructions in a client response card, will be beneficialowners under this Instrument. The scheme of this Instrument does not contemplate that a person or company can be both beneficial owner and intermediary withrespect to the same security.
12. Paragraph (c) has been added to this definition from the February Draft in order to reflect the changes made to section 3.3 of this Instrument, which nowpermits an intermediary to rely upon instructions given by clients under NP41. The February Draft would have required intermediaries to send out client responsecards to all clients, even if they had provided responses under NP41. The CSA are proposing this change in response to comments received concerning theinconvenience and expense associated with the approach contemplated by the February Draft. An analogous amendment has been made to the definition of"objecting beneficial owner".
13. See Form 54-101F5.
The CSA are permitting the preparation of NOBO lists in non-electronic form, at the specific request of the issuer; this request would be made in the request forbeneficial ownership information (Form 54-101F2). This change is proposed in response to comments that certain issuers and third parties may not have thetechnical capacity to receive an electronic list.
14. See the note to the definition of "non-objecting beneficial owner".
15. See Form 54-101F3.
16. See Form 54-101F4.
17. The term "securities legislation" is defined in National Instrument 14-101 Definitions as meaning the particular statute and legislative instruments of thelocal jurisdiction set out in an appendix to that instrument and will generally include the statute, regulations and, in some cases, the rules, forms, rulings andorders relating to securities in the local jurisdiction.
18. See Form 54-101F2.
19. See Form 54-101F6.
20. See Form 54-101F7.
The CSA have removed references to requests for "written" voting instructions from this Instrument in order not to prohibit the use of electronic means tocommunicate this information. The use of non-written voting instructions will, of course, be subject to the requirements of any applicable corporate law. Forexample, section 49 of the Securities Act (Ontario) requires written voting instructions.
21. Paragraphs (d) has been added in response to a comment received that some corporate statutes require or permit the securityholders to set the number ofdirectors to be elected, and that this is properly treated under this Instrument as "routine business". Paragraph (e) has been amended in response to commentsthat only the reappointment of an incumbent auditor should be considered to be routine business; the appointment of an auditor could include a change ofauditor, which is not routine business.
22. The CSA are considering general issues relating to electronic transmission of documents. The CSA expect that the general approach to be taken will be thatdocuments may be transmitted electronically only with the consent of the recipient, and this Instrument has been prepared to reflect that general approach. TheCSA initiative in this area may provide guidance or establish rules concerning consents, which may be made applicable to documents sent electronically underthis Instrument.
23. See the definition of "non-objecting beneficial owner list".
24. This section has been added to simplify the drafting of the fees sections of this Instrument.
25. The CSA, in response to comments, have proposed in the Instrument to delete the minimum notice period of eight days under subsection 2.2(1) and fivedays under subsection 2.5(1) so as to not lengthen the timing provisions contained in NP41.
26. The term "jurisdiction" is defined in National Instrument 14-101 Definitions as meaning a province or territory of Canada, except when used in the termforeign jurisdiction.
27. See Form 54-101F3.
28. See footnote to subsection 2.2(1).
29. See Form 54-101F2.
30. See Form 54-101F8. The CSA, in response to comments, have proposed in this Instrument that a statutory declaration be used to confirm the obligations ofpersons or companies with respect to beneficial owner lists, rather than undertakings as in the February Draft.
31. This section has been amended from the February Draft to provide that a reporting issuer is required to send materials to NOBOs at least 21 days before thedate fixed for the meeting only if the reporting issuer has indicated in the request for beneficial ownership information that it would send the materials and seekvoting instructions from NOBOs. The February Draft required these materials to be sent only if the request for beneficial ownership information was given inconnection with a meeting. The CSA recognize that there may be circumstances in which a reporting issuer wishes to communicate with, and send materials to,NOBOs in connection with a meeting, while allowing the intermediaries to attend to the formal delivery of the proxy-related materials and the obtaining of votinginstructions. In such circumstances, the timing requirements of this section will not apply to the reporting issuer.
In addition, this section has been amended to explicitly state that the sending of materials to NOBOs by a reporting issuer is at the expense of the reportingissuer. This was implicit, but not stated explicitly, in the February Draft.
32. The CSA are proposing to continue the approach contained in NP41 whereby reporting issuers may override the election of securityholders not to receivecertain materials. A reporting issuer would state its intention in that regard in the request for beneficial ownership information sent in connection with themeeting.
33. The term "foreign jurisdiction" is defined in National Instrument 14-101 Definitions. The definition is "a country other than Canada, or political subdivisionof a country other than Canada".
34. See Form 54-101F2.
35. See Companion Policy 54-101 for a discussion of fees.
36. See Form 54-101F2.
37. The CSA have added paragraph (c) to this provision to reflect the fact that it may be more economical in some mailings to send securityholder materials byother than first class mail. In such circumstances, the proximate intermediaries must sort the materials before delivery to the post office, and this provisionpermits the proximate intermediary to recover its costs in that regard. The request for beneficial ownership information permits the reporting issuer to designatehow it wishes the materials to be sent to securityholders. The CSA expect that issuers will agree with intermediaries on the amount of these costs before themailing to enable the issuer to determine whether it wishes the materials to be sent by first class mail or otherwise.
38. The CSA are proposing to amend the fee arrangements from those proposed in the February Draft. This Instrument now proposes that reporting issuers paythe cost of distribution of securityholder materials to OBOs only in respect of distributions to those OBOs that had declined to receive the materials. Theproposed Instrument does not carry forward the proposal contained in the February Draft whereby a reporting issuer that sends securityholder materials toNOBOs indirectly through a proximate intermediary would compensate the proximate intermediary for the costs associated with delivery to all beneficial ownersof securities, including all OBOs.
39. See Form 54-101F6.
40. See Form 54-101F1.
41. See Form 54-101F1.
42. The CSA have amended this section to allow intermediaries to rely upon instructions, or the effect of NP41, with respect to existing clients, as the choicesmade by clients under NP41, and the consequences of not making those choices, are very similar to those made under this Instrument. An intermediary may seeknew instructions from existing clients if it so chooses, in which case it may not rely upon the NP41 approach with respect to those clients. The Draft Instrumentprovided that intermediaries be required to seek new instructions from all clients.
43. This Instrument now provides the OBOs may be responsible for the costs associated with the delivery of materials to them in all circumstances, other thanwhen materials that have been declined by the OBOs are sent. This approach is consistent with the approach taken in NP41, and recognizes that securitieslegislation in a number of jurisdictions allocates to the client any costs related to the sending of securityholder materials by intermediaries (for example, section165 of the Securities Act (Quebec) and section 79(2)(b) of the Securities Act (Alberta). This replaces the approach proposed in the February Draft, in whichreporting issuers would bear the costs associated with the sending of materials to OBOs if the reporting issuers chose to send materials to NOBOs indirectly.
44. See Form 54-101F2.
45. See Form 54-101F4.
46. This section has been amended from the February Draft to provide that a reporting issuer is entitled to receive from the proximate intermediary an omnibusproxy only if the reporting issuer has indicated in the request for beneficial ownership that it will send materials to and seek voting instructions from NOBOs. TheFebruary Draft required these materials be sent only if the request for beneficial ownership information also contained a request for a NOBO list. The CSArecognize that there may be circumstances in which a reporting issuer wishes to communicate with, and send materials to, NOBOs in connection with a meeting,while allowing the intermediaries to attend to the formal delivery of the proxy-related materials and the obtaining of voting instructions. In such circumstances,the omnibus proxy would remain with the proximate intermediary and would not be delivered to the reporting issuer.
47. The securities legislation of some jurisdictions permits some intermediaries to decline to send materials unless the reporting issuer or the beneficial ownerhas agreed to pay the costs of that sending of materials. See, for instance, section 49 of the Securities Act (Ontario).
48. The section corresponds to section 2.10, and provides that securityholder materials will not be sent to OBOs that have declined to receive them except if thereporting issuer has indicated in the applicable request of beneficial ownership information that the materials shall be sent to all beneficial owners of securities.
49. See Form 54-101F3.
50. The CSA are proposing in this Instrument to put third parties, to the extent possible, in the same position as reporting issuers in respect of obtaininginformation concerning beneficial owners of securities of the reporting issuer. The CSA have eliminated the need to make requests for NOBO lists only throughreporting issuers, and have therefore provided in section 6.2 that third parties have substantially the rights and are subject to the obligations of reporting issuersunder this Instrument. Reporting issuers will be provided with copies of intermediary search requests or requests for beneficial ownership information made bythird parties.
As a matter of convenience, the CSA are proposing section 6.1, whereby a third party can obtain from a reporting issuer the most recent NOBO lists in thepossession of the reporting issuer.
51. See Form 54-101F8.
52. This section provides third parties with the rights of a reporting issuer in requesting searches and arranging for the delivery of materials to securityholders.Subsection (3) removes from the operation of this section provisions relating specifically to the calling of meetings and the obtaining of voting instructionsthrough omnibus proxies provided to management of the reporting issuer.
53. See Form 54-101F8.
54. The term "regulator" is defined in National Instrument 14-101 Definitions as meaning, in a local jurisdiction, the person set out in an appendix to thatinstrument opposite the name of the local jurisdiction.
55. In response to comments, the CSA have allowed more time for implementation of the procedures contemplated by this Instrument than provided for in theFebruary Draft.
56. "ISIN" means International Stock Identification Number.