Highly prospective exploration company
Resource projects cover more than 1,713 km2 in three provinces at various stages, including the following: hematite magnetite iron formations, titaniferous magnetite & hematite, nickel/copper/PGM, chromite, Volcanogenic Massive and gold.
Message: So
Transparency In many respects, the Canadian market is similar to the US and by international standards provides low transparency of share ownership as a result of the depositary structure, however with some beneficial features. The Canadian central securities depository, the Canadian Depository for Securities (CDS), immobilises legal ownership in the name of its nominee, CDS & Co, on the register. The Canadian and US markets are closely connected and a number of Canadian issuers also have securities immobilised in DTC. Approximately 80% of shares in Canadian companies are held in CDS and DTC, resulting in very low transparency of investor ownership directly on the share register. CDS provides a daily report of its participant balances for each issue to the relevant issuer’s transfer agent, disclosing the number of shares held in aggregate by each participating intermediary. As a result, issuers have visibility of ownership at the level of the top-tier intermediary in CDS through reporting from their transfer agent. They do not receive equivalent reports in respect of DTC holdings, except on request and for a fee. Additionally, as with the US, street name holders elect to be classified as either NOBOs or OBOs. Issuers can request a list of their Canadian ‘non-objecting beneficial owners’ (NOBOs), that is, those holding through an intermediary at CDS; and a separate list of their US NOBOs, holding through an intermediary at DTC, if relevant. However, as with the US market, NOBOs are predominantly retail investors, while institutional investors are often ‘objecting beneficial owners’ (OBOs). As a result, issuers are left to rely on direct relationships with intermediaries and shareholder notices filed with the Canadian Securities Administrators
(CSA) to identify and engage with their major investors.
Shareholder communications and exercise of voting rights
Canadian issuers are required to send proxy-related shareholder communications to both registered
57 and beneficial58
investors. Beneficial owners can elect to receive communications for all meetings, for special meetings only, or to decline to receive communications for any meetings. Registered holders receive all communications.
While issuers have direct access to their registered shareholders’ data via their share register, the majority of intermediaries have outsourced management of their investor data (beneficial owners) and shareholder communications. However, the Canadian market differs significantly from the US in terms of the legal structure for shareholder communications. In Canada, issuers are allowed, but not required, to communicate directly with their Canadian NOBO investors
, as well as to their registered shareholders. This allows issuers to choose a service provider to manage the communications. If the issuer does not elect to send materials directly to NOBOs, they are required to provide the shareholder materials and pay the intermediaries’ agent for delivery to the beneficial owners.
56 The Canadian Securities Administrators (CSA) is an umbrella organization of Canada’s provincial and territorial securities regulators whose objective is to improve, coordinate and harmonise regulation of the Canadian capital markets. (CSA Website, 2013)
57 Provincial Business Corporations Acts
58 National Instrument 54-101 [section 2.7], introduced in 2002
59 National Instrument 54-101
2.14 Canada
Nominee
An intermediary that registers shares in its own name, in either omnibus or segregated accounts, instead of in the name of its client. The intermediary holds the shares on behalf of their client. Where multiple chains of intermediation are present, the nominee’s client may be another intermediary (e.g. a global custodian) rather than the beneficial owner of the shares.
Beneficial owner
An investor who owns an interest in a security. The nature of the interest is determined by the applicable laws. A beneficial owner may also hold legal title to the share. Frequently the beneficial owner contracts with an intermediary, in which case the beneficial owner is an indirect holder.
32 > Computershare
Communication with OBOs in Canada remains fully intermediated. While Canadian law under National Instrument 54-101 requires the issuer to send communications to NOBO investors either directly or indirectly, it does not similarly oblige issuers to pay to have communications sent to OBOs. The issuer must provide the intermediaries with the meeting information and proxy materials for each OBO but is not required to pay the costs of the intermediary in sending these to the OBO investors. The intermediaries are obliged to deliver the material to the OBOs, and have the option of covering these costs by charging the OBO client a fee, although in practice many intermediaries do not do so. However, most Canadian issuers do pay for shareholder communications to be sent to OBOs.
For communication with US investors that hold shares via intermediaries in DTC rather than CDS, the issuers use US market mechanisms; thus all communications to both US NOBOs and OBOs are indirect.
In August 2013 the CSA commenced a consultation on aspects of the Canadian proxy system, due to concerns with the processes for proxy voting by beneficial owners. While in Canada intermediaries are expected under market guidelines to reconcile their investor positions prior to the distribution of materials; this is not common market practice and is not a formal regulatory requirement. Stock held in margin accounts and used in security lending, coupled with a lack of reconciliation, can result in both the margin holder and the borrower of the securities being sent voting instruction forms, leading to concerns of over-voting. Pro-rating or dropping votes are used as after the fact mechanisms, on approval by the meeting chair, to reconcile the votes lodged to securities entitlements. Similar to the US, there have been calls for reform of the proxy voting process to address these and related issues to the integrity of the voting process
60.
Most foreign investors in Canadian securities hold their securities through their local intermediary, which holds the relevant Canadian securities within CDS or DTC, using the services of a US or Canadian intermediary. The issuer’s access to foreign shareholders is very limited. While Canadian and US intermediaries are required to pass on shareholder communications if the issuer pays, this obligation does not extend outside North American markets. A foreign investor’s local intermediary has no equivalent obligation to pass on the meeting materials to the beneficial owners, or to pass back any voting instructions. Communications to registered and beneficial owners may be in hard copy or via email if consent to e-delivery is received. Where the issuer elects to send materials directly to Canadian NOBO investors they are largely unable to benefit from the investors’ consent to e-delivery. Consent is provided to the intermediary and the wording of most consent agreements limits applicability to the intermediary or the intermediary’s agent for email delivery, which does not extend to the issuer’s agent. Therefore, the issuer is excluded from the cost savings of email for direct communications. In the 2013 proxy season, Canada also introduced Notice and Access, similar to the US arrangement described above, which was used by approximately 10% of issuers. Meetings that use Notice and Access are subject to longer record date and timetables to standard mailings of meeting materials, to allow investors to request hard copy materials if preferred.
Registered and beneficial owners that hold a relevant issuer’s securities at the record date are eligible to vote. Registered shareholders vote directly by lodging their paper, telephone, internet or mobile device vote with the issuer’s tabulator, usually the transfer agent. Beneficial owners have similar voting mechanisms available to them. However, by virtue of their intermediated holding structure, a system of proxy appointment is put in place from CDS & Co or CEDE & Co, the nominees for the two North American CSDs, to the intermediaries, to allow the recording of votes lodged by beneficial owners. Beneficial owners are allowed to vote in person at a meeting if they use the appointment process available on the voting instruction form, appoint themselves to vote in lieu of Management’s nominees, and submit the form prior to proxy cut-off. http://www.computershare.com/au/business/gcm/regulatory-and-market-initiatives/submissions-and-papers/Documents/TransparencyofShareOwnershipShareholderCommunicationsandVotinginglobalcapitalmarkets_12032014.pdf ********* Clear as mud?? Cheers, Luker
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