By Danica Bennewies
Welcome back to another installment of Top Five Friday Finds – the weekly series where we share five of the top securities and corporate law news stories that dominated the headlines, and our conversations, this week. We’ve got a great round-up of stories today, so take a quick break from your work day (or Black Friday shopping) to get caught up with us.
First, let’s discuss the major enforcement news items.
The Alberta Securities Commission (ASC) announced on Tuesday that it is expanding its enforcement toolbox by adding a whistleblower program. The regulator has also created the Office of the Whistleblower (OWB), which will allow whistleblowers to report potential securities law breaches in a way that is safe and easy. Accompanying the introduction of the program were amendments to Alberta’s Securities Act to ensure that whistleblowers are rigorously protected. The new provisions mandate that the identity of whistleblowers will remain confidential except in a limited number of circumstances, and that they will be protected from reprisal. The Ontario Securities Commission (OSC) introduced a similar program in Ontario in 2016. However, unlike the OSC’s program, the ASC’s program will not offer financial incentives to whistleblowers whose tips lead to serious enforcement action. While the OSC says that these incentives are a “critical element” of the whistleblower program, it has yet to publicize any financial awards that have been paid under the program.
On Thursday, the OSC announced that it will be holding a hearing next week to discuss a settlement with Toronto portfolio management firm Questrade Wealth Management Inc (QWM) regarding its business dealings with WisdomTree Asset Management Canada Inc. In July 2017, WisdomTree purchased eight ETFs from QWM. Following this sale, QWM purchased $15 million of WisdomTree ETFs for client portfolios. The OSC alleges that QWM failed to carry out a proper assessment regarding possible conflicts of interest in the purchase. The allegations have yet to be proven, and the settlement hearing is scheduled for next Tuesday. A full statement of the OSC’s allegations against QWM can be found on the commission’s website.
Looking globally, the Elon Musk story may have died down for the moment, but there’s now a new scandal to take its place. On Monday, Nissan board chairman Carlos Ghosn was arrested following allegations of financial misconduct. Ghosn and Greg Kelly, an American board member, are suspected to have conspired to understate Ghosn’s income at Nissan by half of its full value of 10 billion yen ($117 million USD) over the years 2010 to 2015. Ghosn could face up to 10 years in prison and a fine of up to 10 million yen, the maximum punishment for such financial misconduct in Japan. The board has since voted to remove Ghosn from his chairman position, and voted to remove Kelly as well. Nissan has not yet named an interim chairman.
Shifting our focus now to the latest proxy issues, the Securities and Exchange Commission (SEC) held a proxy process roundtable at the end of last week. The roundtable consisted of three panels moderated by SEC staff, addressing three different topics: proxy voting mechanics and technology, shareholder proposals, and proxy advisory firms. A number of important questions and issues were raised. For example, in the first panel, the panelists broadly agreed that the current proxy voting system was inefficient and often inaccurate. However, the question remained whether the SEC should try to repair the current system or start over from scratch. At the proxy advisory panel, panelists discussed whether proxy advisory firms have too much unaccountable power over proxy votes and if they need to be reigned in. Surprisingly, there was not a strong push for registration and enhanced regulation of proxy advisors, with some panelists worrying that regulation would result in increased costs to investment advisors. If you’re interested in learning more about the proxy process roundtable, you can find the commissioners’ and chairman’s opening statements on the SEC website.
Finally, on Monday, the proxy advisory firm Institutional Shareholder Services Inc (ISS) announced that it will be expanding its voting policy regarding gender diversity at Canadian companies. The firm’s policy, introduced in 2017, originally only applied to firms included in the S&P/TSX composite index, but will now also be extended to firms that do not belong to the index. In a news release, the ISS shared findings that approximately 12% of widely held companies listed on the TSX do not have either a minimum of one female director or a formal gender diversity policy. ISS has chosen to expand the application of its voting policies to a wider range of companies because many of these companies are widely institutionally-held, making their corporate governance practices a “subject of heightened scrutiny by institutional investors”. A complete breakdown of ISS’ 2019 voting policy updates can be found in the company’s latest Proxy Voting Guidelines report.
That’s all for this week! Thanks for joining us here on the blog and be sure to check back next week for another Friday Finds.