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BCSC panel finds MFDA acted improperly in soliciting proxies

  • Date:

    2011-01-12

  • Number:

    2011/03

Vancouver - A British Columbia Securities Commission panel has found that the Mutual Fund Dealers Association of Canada (MFDA) acted improperly in soliciting proxies from its members. 

The BCSC panel’s decision is the result of a review into the MFDA’s conduct in connection with governance decisions the self-regulatory organization (SRO) made following an annual general meeting and the solicitation process it conducted for a special general meeting of its membership in October 2009.
 
The panel said the MFDA directors failed to consider how the solicitation of proxies by an SRO from its members differed from a solicitation by a company from its shareholders.

“We find that the MFDA board’s decision to conduct the proxy solicitation process as it did for the October 2009 special meeting would have led an objective observer to question the integrity and credibility of the MFDA in managing that process,” the panel said.

The panel noted that the MFDA’s board and executive had built the MFDA into an effective and credible regulator of mutual fund dealers.  It went on to say, “It is important to state that our findings in this matter are restricted to a narrow issue related to the MFDA’s internal governance,” and “we are not making any adverse findings about the MFDA’s overall integrity or credibility as an SRO.”

The panel also found that the MFDA board’s decisions regarding two of its former directors after the December 2008 annual general meeting would not lead an objective observer to question the integrity or credibility of the organization.

In its decision, the BCSC panel directed the MFDA to, among other things, use a third party proxy solicitation firm to solicit proxies instead of MFDA directors, officers and employees, and to keep member votes confidential from MFDA officials.  The panel also directed the MFDA not to implement the amendments passed at the October 2009 meeting until the members vote on those amendments at a meeting conducted in accordance with its directions.

The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities within the province. You may view the ruling on our website www.bcsc.bc.ca by typing in the search box, Mutual Fund Dealers Association of Canada or 2011 BCSECCOM 16 New window. If you have questions, contact Ken Gracey, media relations, 604-899-6577.

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