New Regulatory Guidance on Soliciting Dealer Arrangements

The Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Securities Administrators (CSA) recently published an update on the management of conflicts of interest arising from soliciting dealer arrangements.

Soliciting dealer arrangements are agreements that incentivize IIROC Dealer Members (Dealers) to encourage securityholders of an issuer to vote their securities or take action in connection with an acquisition or other transaction involving the issuer. For example, an issuer may agree to pay a Dealer a fee for soliciting votes from shareholders in respect of a shareholders’ meeting. These arrangements can raise regulatory concerns about the ability of a participating Dealer to comply with IIROC’s conflicts rule and related guidance.

IIROC Notice 19-0092 Managing Conflicts of Interest arising from Soliciting Dealer Arrangements (the Notice) includes the regulators’ guidance on the most appropriate and effective means of addressing regulatory concerns associated with soliciting dealer arrangements.

The Notice sets out IIROC’s view that in some cases, conflicts of interest arising from soliciting dealer arrangements can be managed through appropriate policies and procedures. In other cases, where conflicts are or appear to be unmanageable, they should be avoided. For example, Dealers should avoid arrangements that contemplate one-sided or success-based fees in contested director elections.

You can read the Notice here.

DISCLAIMER: This post is intended to convey general information about legal issues and developments as of the date above. It does not constitute legal advice and must not be treated or relied on as such.