The Ontario Securities Commission has announced:
The Canadian Securities Administrators (CSA) today published for comment CSA Staff Notice 61-303 and Request for Comment Soliciting Dealer Arrangements. The notice outlines regulatory issues raised by soliciting dealer arrangements and seeks input on the practice, which generally involves an issuer paying a dealer to successfully solicit securities from a securityholder in connection with corporate transactions.
The actual notice asks:
3. Are soliciting dealer arrangement fees typically only paid in respect of votes “for” management’s recommendations? Is that appropriate in all circumstances? Is there a reason to distinguish proxy contests in this regard?
…
5. Do you think that the potential conflict of interest on the part of an investment dealer or a dealing representative can be effectively managed?a. If so, what steps should an investment dealer take to appropriately manage or avoid the conflict of interest? What steps should a dealing representative take, beyond disclosure, to appropriately manage or avoid the conflict of interest?
b. Does the answer differ depending on whether the transaction is
i. a take-over bid tender,
ii. a securityholder vote in relation to a merger or acquisition transaction,
iii. a securityholder vote to amend the terms of a security, or
iv. a securityholder vote in the context of a proxy contest?
c. In the context of a securityholder vote in relation to a merger and acquisition transaction, does the answer to #5 differ depending on whether the fee is contingent on the securityholder voting in favour of the transaction and/or the transaction being approved?
d. In the context of a proxy contest, does the answer to #5 differ if the fee is contingent on the securityholder voting in favour of management’s nominees and/or management’s nominees being elected?
e. What type of communication and disclosure by investment dealers and dealing representatives should be made to the securityholder respecting the existence of a soliciting dealer arrangement?
6. Do you think that there are circumstances in which it would never be appropriate for an investment dealer to enter into a soliciting dealer arrangement? If so, please discuss what such circumstances would be.
7. Are soliciting dealer fees paid to investment dealers and/or dealing representatives in connection with securities held in managed accounts? If so, in what circumstances?
8. How can investment dealers and dealing representatives participating in a soliciting dealer arrangement in respect of a proxy contest ensure compliance with the proxy solicitation rules?
9. Are investment dealers and/or dealing representatives involved in proxy contests where a proxy solicitation firm has been retained?
10. Do you believe that an investment dealer or a dealing representative has a responsibility to encourage its client to respond to proxy solicitations, rights offerings, take-over bids or other corporate transactions such as conversion of convertible securities?
Steven M. Harris, Jennifer F. Longhurst and Gilles R. Comeau of DAVIES WARD PHILLIPS & VINEBERG LLP have issued a bulletin titled CSA Reviewing and Seeking Comments on Soliciting Dealer Arrangements in Proxy Contests and Corporate Transactions in which they provide a little background. Naturally, the emphasis is on proxy contests, in which the legal fees are higher than in ‘change of terms’ solicitations.
My own views on sleaze fees has been made public for some time, most recently with respect to the aborted TransAlta preferred share exchange in early 2017. In a nutshell: it is grossly improper for a portfolio manager to accept payola for voting in a certain way but I see nothing wrong with a salesman collecting his little envelope for voting in a certain way (let’s just make sure that their business card says “salesman”, OK? and that there is no corporate overlap whatsoever between companies that employ salesmen paid by issuers and transaction charges and those which employ portfolio managers paid solely by clients). However, as has been discussed on PrefBlog far too often, there is a vast constituency of ha-ha “investor advocates” ho-ho who believe that paying salesmen commission is an affront to capitalism and should be banned. So there might be some who disagree with me regarding the propriety of salesmen getting their palms greased – it’s self-evident that if trailers are improper then so are solicitation fees.
Anyway … now it’s time for PrefLetter!
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3022 % | 3,001.6 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3022 % | 5,507.8 |
| Floater | 3.33 % | 3.53 % | 100,753 | 18.48 | 4 | -0.3022 % | 3,174.2 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0198 % | 3,156.2 |
| SplitShare | 4.56 % | 4.62 % | 79,815 | 5.11 | 4 | -0.0198 % | 3,769.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0198 % | 2,940.9 |
| Perpetual-Premium | 5.56 % | -8.79 % | 72,763 | 0.09 | 11 | 0.0826 % | 2,868.3 |
| Perpetual-Discount | 5.38 % | 5.41 % | 68,751 | 14.82 | 24 | 0.1913 % | 2,949.2 |
| FixedReset | 4.30 % | 4.70 % | 163,011 | 4.46 | 104 | 0.2437 % | 2,514.8 |
| Deemed-Retractible | 5.12 % | 5.59 % | 84,913 | 5.67 | 28 | 0.1290 % | 2,948.1 |
| FloatingReset | 3.02 % | 2.91 % | 33,905 | 3.60 | 11 | 0.2095 % | 2,765.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.Q | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2023-06-19 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : 4.56 % |
| TRP.PR.A | FixedReset | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-04-13 Maturity Price : 19.97 Evaluated at bid price : 19.97 Bid-YTW : 4.99 % |
| MFC.PR.N | FixedReset | 1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.03 Bid-YTW : 5.71 % |
| GWO.PR.S | Deemed-Retractible | 1.13 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 5.32 % |
| MFC.PR.M | FixedReset | 1.58 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.17 Bid-YTW : 5.70 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.J | FixedReset | 183,080 | YTW SCENARIO Maturity Type : Call Maturity Date : 2023-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 4.44 % |
| TD.PF.A | FixedReset | 175,450 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-04-13 Maturity Price : 22.28 Evaluated at bid price : 22.65 Bid-YTW : 4.73 % |
| TRP.PR.J | FixedReset | 84,552 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-05-31 Maturity Price : 25.00 Evaluated at bid price : 26.32 Bid-YTW : 3.96 % |
| TD.PF.H | FixedReset | 78,085 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-10-31 Maturity Price : 25.00 Evaluated at bid price : 26.02 Bid-YTW : 3.57 % |
| RY.PR.H | FixedReset | 63,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-04-13 Maturity Price : 22.75 Evaluated at bid price : 23.20 Bid-YTW : 4.70 % |
| IFC.PR.E | Deemed-Retractible | 53,632 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.55 Bid-YTW : 5.59 % |
| There were 23 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| W.PR.H | Perpetual-Discount | Quote: 24.45 – 24.90 Spot Rate : 0.4500 Average : 0.2798 YTW SCENARIO |
| HSE.PR.G | FixedReset | Quote: 25.01 – 25.27 Spot Rate : 0.2600 Average : 0.1915 YTW SCENARIO |
| CU.PR.D | Perpetual-Discount | Quote: 23.43 – 23.69 Spot Rate : 0.2600 Average : 0.1941 YTW SCENARIO |
| RY.PR.J | FixedReset | Quote: 24.20 – 24.33 Spot Rate : 0.1300 Average : 0.0890 YTW SCENARIO |
| SLF.PR.C | Deemed-Retractible | Quote: 21.21 – 21.34 Spot Rate : 0.1300 Average : 0.0893 YTW SCENARIO |
| TRP.PR.J | FixedReset | Quote: 26.32 – 26.43 Spot Rate : 0.1100 Average : 0.0749 YTW SCENARIO |