One of the fundamental rights of a shareholder is to vote its shares, and it goes without saying that it is important that each vote cast is given its full weight. However, recent discussion surrounding the proxy voting infrastructure has highlighted that this may not always occur. One wrinkle that may appear when an issuer’s shares are held through the US Depository Trust & Clearing Corporation (DTCC). However, simple awareness of the issue can allow a company to take steps to ensure that shareholder voting proceeds as easily and accurately as possible.
Omnibus Proxies and Security Position Reports
In counting votes for a shareholder meeting, it is critical that the proxy tabulator have access to the chain of beneficial ownership so they can record beneficial holder voting instructions against the correct financial intermediary share ownership position.
In Canada, upon the calling of a shareholder meeting, the Canadian Depository for Securities (CDS) will send an omnibus proxy to the issuer’s transfer agent (as proxy tabulator and scrutineer) to confirm the voting entitlements of those beneficial holders who own the issuer’s securities through each CDS participant. However, when shares are held through members of the DTCC, the omnibus proxy is sent to the issuer and not to the transfer agent. As a result, it is up to the issuer to ensure that the DTCC omnibus proxy and Security Position Report (SPR) are delivered to the transfer agent as soon as possible after they are received. A failure to deliver these documents to the transfer agent may result in validly cast votes being discarded by the meeting tabulator.