Annex A. Summary of Comments and Responses on Notice and Request for Comment

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1 Annex A Summary f Cmments and Respnses n Ntice and Request fr Cmment Amendments t Natinal Instrument Cmmunicatin with Beneficial Owners f Securities f a Reprting Issuer and Cmpanin Plicy CP Cmmunicatin with Beneficial Owners f Securities f a Reprting Issuer Amendments t Natinal Instrument Cntinuus Disclsure Obligatins and Cmpanin Plicy CP Cntinuus Disclsure Obligatins This annex summarizes the written public cmments we received n the 2011 Prpsal. It als sets ut ur respnses t thse cmments. List f Parties Cmmenting n the 2011 Prpsal Bradridge Financial Slutins, Inc. Canadian Bankers Assciatin Cmputershare Trust Cmpany f Canada, Cmputershare Investr Services Inc. and Gergesn Sharehlder Cmmunicatins (jint cmment letter) Investment Industry Assciatin f Canada Muvement d éducatin et de défense des actinnaires Natinal Bank f Canada Osler, Hskin & Harcurt LLP Securities Transfer Assciatin f Canada 1. Ntice-and-access (a) General cmments n ntice-and-access We received a cmment that ntice-and-access shuld nt be intrduced withut further study f the familiarity f sharehlders with websites and apprpriate regulatins t facilitate their access and review f infrmatin circulars. Respnse: Our view is that the ntice-and-access prvisins strike an apprpriate balance between sharehlder access t materials and a mre streamlined delivery prcess. We will mnitr the implementatin f ntice-andaccess t assess the impact n sharehlders. We als received several cmment letters recmmending that investment funds be permitted t use ntice-and-access. 1

2 Respnse: We are nt prepared at this time t extend ntice-and-access t investment funds withut further study. We will cnsider this issue at a later date. (b) Ntice and permitted infrmatin in the ntice package We received a number f detailed cmments n prpsed s t f NI , which set ut the ntice-and-access prcess. The main cmments cmprised the fllwing recmmendatins: allwing r requiring all the requisite infrmatin t be prvided in a single ntice dcument, rather than a ntice and a separate dcument explaining ntice-and-access; remving the requirement t reference page numbers in the infrmatin circular; requiring a factual descriptin f matters t be vted n nly if the matter t be vted n is nt therwise fully described in the vting instructin frm r prxy; remving the requirement t specify a date and time by which a request fr a paper cpy f the infrmatin circular must be received; remving the requirement fr the reprting issuer t explain its reasn fr using ntice-and-access; requiring the reprting issuer t disclse whether it is paying fr intermediaries t frward prxy-related materials t OBOs. Respnse: We generally have accepted mst f the recmmendatins specified abve, althugh in sme cases we have made mdificatins t the specific alternatives prpsed. We have, amng ther changes, amended s. 1.3 f NI t clarify that any required dcument (and nt just frms) that a persn r cmpany is required t send can be substituted fr anther frm r dcument r cmbined with anther frm r dcument, s lng as the frm r dcument used requests r includes the same infrmatin cntemplated by the required frm r dcument. Hwever, we are nt adpting the recmmendatin regarding disclsure f whether the reprting issuer is paying fr intermediaries t frward prxy-related materials t OBOs. We d nt think this infrmatin needs t be included in the ntice, as it is already prvided in the ntificatin f meeting and recrd dates which is filed n SEDAR. We strngly encurage all market participants t wrk tgether t develp industry 2

3 best practices and standards fr the ntice t make it as user-friendly and cnsistent fr investrs as pssible. (c) Ntice in advance f first use f ntice-and-access We received several cmments that questined the utility f the requirement in prpsed s that a reprting issuer prvide advance ntice nt mre than 6 mnths and nt less than 3 mnths befre the first meeting fr which ntice-andaccess wuld be used. Several alternatives were suggested, including that the ntificatin f meeting and recrd dates required by s. 2.2 f NI filed n SEDAR wuld be adequate. It was nted by ne cmmenter that sharehlders wuld be unlikely t act upn three mnths advance ntice t educate themselves n ntice-and-access; that the need fr advance ntice fr a reprting issuer adpting ntice-and-access fr the first time wuld diminish as sharehlders became increasing familiar with the prcess; and that the cncept f an expected date fr the meeting is an unwrkable standard. Respnse: We have adpted this recmmendatin. A reprting issuer that uses ntice-and-access fr the first time must file the ntificatin f meeting and recrd dates, which includes infrmatin n whether the issuer will use ntice-and-access, n SEDAR at least 25 days befre the recrd date fr ntice, which in turn must be at least 40 days befre the meeting. We think that this greater lead time will enable issuers using ntice-and-access fr the first time t mre smthly implement nticeand-access. We strngly encurage all market participants t wrk tgether t develp industry best practices and standards as ntice-andaccess is intrduced fr the first time. (d) Cnsent t ther delivery methds/electrnic delivery f ntice package We received several cmments and questins regarding hw ntice-and-access will interact with the delivery f prxy-related materials, including annual financial statements and related MD&A. Respnse: We have made a number f changes t address these cmments. In particular, please see new s. 3.5(2) f CP, which clarifies that annual financial statements and related MD&A can be sent fr purpses f s. 4.6(5) using ntice-and-access. Our understanding is that currently, the primary service prvider fr intermediaries has a separate e-delivery platfrm fr delivering prxyrelated materials which is intended t be distinct frm the ntice-andaccess platfrm. The guidance clarifies that this type f separate e- delivery platfrm can be used in cnjunctin with ntice-and-access. In additin, the ntice package can als be delivered electrnically (subject 3

4 t btaining the beneficial wner s cnsent) if this delivery ptin is available. (e) Standing instructins t receive paper cpies f infrmatin circulars and/r annual financial statements and related MD&A We received a cmment prpsing that changes be made t Frm F1 Client Respnse Frm t accmmdate standing instructins, and requiring the prvisin f infrmatin n standing instructins in the explanatin f ntice-andaccess required t be sent under s Anther cmmenter als nted that sme dealers expressed cncern arund implementatin and management f a standing instructin database and that dealers wished t have the pprtunity t cnsider and discuss the changes with regulatrs and service prviders befre stating a view. We als received a cmment that a reprting issuer shuld give effect t standing instructins it receives frm registered sharehlders whether r nt it has taken steps t btain standing instructins. Respnse: The intent f the prvisins relating t standing instructins and intermediaries is t permit but nt require intermediaries t btain standing instructins n the inclusin f paper cpies f the infrmatin circular and/r annual financial statements and related MD&A. It is ultimately the intermediaries decisin (in cnsultatin with service prviders) whether t implement peratinal prcedures t btain standing instructins, and whether, as a result, intermediaries will need t give additinal infrmatin t clients in Frm F1 Client Respnse Frm regarding prvisin f standing instructins. We have nt adpted the recmmendatin that a reprting issuer give effect t standing instructins whether r nt it has taken steps t btain them. T require this wuld effectively require reprting issuers t implement and manage a database f standing instructins, and we d nt think that this measure is warranted at this time. (f) Stratificatin One cmmenter cautined that it may be necessary r advisable t limit the criteria applied t stratificatin and asked fr clarificatin as t what ther criteria fr stratificatin it fresees as being acceptable. Respnse: The intent f the prvisins relating t stratificatin is t permit but nt require stratificatin t be used by, r available as an ptin t, reprting issuers and intermediaries. It is ultimately fr reprting issuers and intermediaries (in cnsultatin with the varius service prviders) t decide whether stratificatin is an apprpriate and 4

5 feasible feature fr ntice-and-access, subject t the guidance we have prvided n the apprpriate bjectives fr stratificatin. We d nt prpse t mandate specific permitted stratificatin criteria, althugh we will cntinue t mnitr this issue. We strngly encurage market participants t develp best practices fr stratificatin criteria shuld stratificatin be intrduced as a feature f ntice-and-access in the Canadian cntext. We nte that stratificatin has been a feature f US ntice-and-access fr several years, and this experience may be helpful t market participants in develping stratificatin ptins and best practices. (g) Recrd date fr ntice A cmmenter nted that if the recrd date fr ntice was set at 30 days befre the meeting date as currently permitted in s. 2.1 f NI , there wuld be peratinal challenges fr all parties in the prcess t verify the recrd date infrmatin and send the requisite materials n mre than 30 days befre the meeting. The cmmenter requested that s. 2.1 be mdified s that the recrd date fr ntice under ntice-and-access leaves sufficient time fr cmpliance with the psting and delivery requirements. Respnse: We have adpted this recmmendatin. (h) Cllectin f infrmatin n websites One cmmenter nted that there may be sme significant practical prblems assciated with permitting the cllectin f infrmatin n sme securityhlders (i.e. registered hlders) and nt thers (i.e., beneficial wners) n the website t which prxy-related materials are psted. Respnse: It is up t the reprting issuer using ntice-and-access, in cnjunctin with relevant service prviders, t determine hw t cmply with the restrictins n cllecting infrmatin in a cst-effective manner. (i) Availability f exemptin t use US ntice-and-access A cmmenter submitted that any issuer that is mandatrily subject t Rule 14a-16 shuld be able t use US ntice-and-access exclusively, and nt have t cmply with the Canadian ntice-and-access requirements. Alternatively, it prpsed that any disqualifying criteria frm accessing the exemptin shuld be tied slely t the trading vlume f the issuer s securities in Canada relative t its trading vlume in the United States. Finally, it als prpsed that an SEC issuer that vluntarily cmplies with Rule 14a-16 despite being an exempt freign private issuer under the SEC s rules shuld als be entitled t rely n the Canadian ntice-and-access requirements exemptin, subject t whatever disqualificatin test based n cnnectins t Canada is ultimately adpted. 5

6 Respnse: We are nt adpting this recmmendatin at this time. Althugh the Sharehlder Vting Cmmunicatin Prcess in the United States and Canada are bradly similar, there are imprtant differences. These include differences in the mechanisms by which a beneficial wner btains authrity t attend and vte at a meeting and differences in what dcuments are required t be sent as part f prxy-related materials. The Canadian ntice-and-access prcedures have been frmulated t take these and ther specific features f the Canadian Sharehlder Vting Cmmunicatin Prcess int accunt. We nte that there are a number f exemptins frm Canadian securities legislatin that als apply t SEC issuers. (j) Use f ntice-and-access by third parties A cmmenter requested clarificatin n the bligatins and restrictins applicable t third parties in using ntice-and-access, particularly in light f s. 6.2 f NI Fr example, hw wuld the restrictin in s (2) (requiring the reprting issuer t send a paper cpy f the infrmatin circular if the ntice-and-access package includes any particulars f any matter submitted t the meeting that g beynd what is permitted in s ) apply t third parties? Respnse: We have added s t address this pint. We nte that ntice-and-access is a delivery mechanism fr prxy-related materials, and des nt mdify any existing legal bligatins f third parties such as dissident sharehlders in the Sharehlder Vting Cmmunicatin Prcess. (k) Miscellaneus cmments We received a number f ther detailed drafting and technical cmments and have adpted a number f them. 2. Sending ntice nly package when reprting issuer decides nt t pay fr delivery t OBOs A cmmenter asked that we mandate that a reprting issuer wh chses nt t pay fr an intermediary t frward prxy-related materials t OBOs pay fr the frwarding f a ntice nly package, defined as a package withut a paper cpy f an infrmatin circular. Respnse: We are nt adpting this suggestin at this time, and will cnsider this issue separately. We nte that we wuld have n cncerns if, where a reprting issuer chse nt t pay, an intermediary vluntarily sent the ntice nly package t its beneficial wner clients. 6

7 3. Indirect sending f securityhlder materials by reprting issuer A cmmenter tk the view that remving the present s. 2.12(2) f NI and instead prviding guidance in CP effectively permits an issuer t chse t deliver materials fr frwarding t beneficial wners t any ffice f an intermediary, rather than t the designated agent f that intermediary. The cmmenter nted that this wuld impede timely delivery f materials t investrs, add csts and reduce the verall efficiency f the delivery prcess. The cmmenter als requested that s be amended t clearly require that reprting issuers pay fr delivery f material t intermediaries fr frwarding. Respnse: Our view is that the present s. 2.12(2) s use f the wrd may can be interpreted as permitting, but nt requiring a reprting issuer t deliver materials t the intermediary s agent. This was nt the intent f the prvisin, which was t clarify that a reprting issuer wuld nt have failed t cmply with its bligatins t send securityhlder materials because it fllwed an intermediary s instructin t send the materials t the intermediary s third-party agent. We have added language t s. 2.7 f CP t further clarify that we expect reprting issuers t send materials t the agent designated by the intermediary unless alternate arrangements have been made with that intermediary. We think the wrding f s (as amended) clearly states the reprting issuer s bligatin t send a prximate intermediary the requisite number f sets f materials specified by the prximate intermediary. A reprting issuer that refuses t send these materials t a prximate intermediary is nt cmplying with its bligatins under this sectin. We have mdified the guidance in s (3) f CP t further clarify this pint. The same cmmenter tk the view that an issuer shuld be bligated t deliver materials t all intermediaries in a freign jurisdictin fr frwarding t beneficial wners in that jurisdictin. Respnse: NI effectively nly requires reprting issuers t send prxy-related materials t beneficial wners wh hld their securities thrugh intermediaries that are cvered by the request fr beneficial wnership infrmatin. Sectin 2.5(1) specifies that the request nly applies t each prximate intermediary that is: (a) identified by a depsitry (currently nly CDS) as a participant in the depsitry hlding securities that entitle the hlder t receive ntice f the meeting r t vte at the meeting; r (b) listed as an intermediary n the intermediary master list prvided by a depsitry where the intermediary, r a nminee f the intermediary that is identified n the intermediary master list, is a registered hlder 7

8 f securities that entitle the hlder t receive ntice f the meeting r t vte at the meeting. We are nt adpting this recmmendatin at this time and will cnsider this issue separately. In the meantime, we strngly encurage reprting issuers t send prxy-related materials t any intermediary in a freign jurisdictin wh requests them n behalf f beneficial wners. 4. Requests fr NOBO lists A cmmenter raised a cncern that prpsed s. 2.5(4) requires an intermediary t make an assessment abut whether a persn r cmpany requesting a NOBO list has the technlgical capacity t receive the list. The cmmenter als nted cncerns n the part f dealers abut their ability t assess the technlgical capacities f a wide variety f reprting issuers and third parties, and als abut issues that culd arise shuld an intermediary determine nt t prvide the list. The cmmenter prpsed an alternative self-certificatin prcess, whereby the requester certifies as t its technlgical capacity t receive the list. Respnse: We have adpted this recmmendatin and made changes t the undertaking in Frm F9. Anther cmmenter recmmended that s. 2.5 be amended t nt require any request fr beneficial wnership infrmatin t cme thrugh a transfer agent, regardless f whether the request is nly fr the limited purpse f requesting a NOBO list. Respnse: We are nt adpting this recmmendatin. 5. Appinting beneficial wner as prxy hlder A cmmenter was cncerned that requiring a beneficial wner r its nminee appinted under s. 2.18(2) r s. 4.5(2) be given authrity t attend, vte and therwise act fr and n behalf f management f the reprting issuer r intermediary (as applicable) culd cnflict with the laws applicable t certain, largely freign cmpanies which nly permit prxyhlders t vte n items set ut in the infrmatin circular. The cmmenter als was cncerned that requiring that this authrity be limited if expressly instructed by a beneficial wner wuld be difficult t implement. Respnse: We have mdified the relevant sectins t clarify that the required grant f authrity is subject t any prhibitins under crprate law. We have remved the reference t express limitatins n vting authrity by beneficial wner. In ur view, a beneficial wner that wishes t prvide mre limited vting authrity can make apprpriate arrangements with its appintee withut necessarily invlving 8

9 management f the reprting issuer r the intermediary (as applicable). A cmmenter requested that prpsed s be amended t permit management f the reprting issuer t use the pwer f substitutin in the prxy they hld n behalf f NOBOs (where the reprting issuer is sending prxy-related materials directly t NOBOs) t send prxies instead f VIFs t NOBOs. Cnversely, anther cmmenter requested that s. 3.6 f CP be amended t expressly state that sending prxies instead f VIFs is nt permitted. Respnse: We are nt adpting either recmmendatin at this time. We will cnsider this issue at a later date. While we supprt in principle measures t simplify the vting prcess f all beneficial wners, we believe the prcess described abve needs t be studied further in the cntext f the larger Sharehlder Vting Cmmunicatin Prcess befre determining whether it is apprpriate t cdify it in NI Use f alternate frms A cmmenter requested that s. 1.3 f NI be expanded t a mre general prvisin that allws participants t use frms and dcuments that are acceptable fr the purpses f crprate statutes and fr achieving the purpse f NI The bjective wuld be t prevent technical nn-cmpliance with the Instrument frm being a factr that culd ptentially invalidate the vte fr the meeting under crprate statutes, if therwise acceptable dcumentatin exists t allw nnregistered hlders t exercise their rights t vte. Respnse: We are nt adpting this recmmendatin at this time. We will cnsider this issue at a later date. We believe the issue described abve is an imprtant ne, but that it needs t be studied further in the cntext f the larger Sharehlder Vting Cmmunicatin Prcess befre determining whether it is apprpriate t make the requested changes t NI Recnciliatin f psitins A cmmenter called fr NI t explicitly require intermediaries t: Recncile the files f beneficial wnership data with their registered, depsitry and nminee psitins; Give clear directin t the tabulatr regarding thrugh which depsitry, nminee r intermediary securities being vted are held; Ensure that any mnibus prxy required frm an intermediary r depsitry thrugh whm they hld shares is being filed; and 9

10 Ensure that a restricted prxy is nt issued by the intermediary withut verifying that a psitin has nt been vted. Respnse: We are nt adpting this recmmendatin at this time. We will cnsider this issue at a later date. We believe the issue f recnciliatin f vting psitins is an imprtant ne and needs t be studied further in the cntext f the larger Sharehlder Vting Cmmunicatin Prcess befre determining whether it is apprpriate t cdify prvisins affecting this issue in NI and the frm thse prvisins shuld take. 10