The Canadian Securities Administrators have released a bulletin on new mutual fund disclosure rules, including a requirement making it mandatory for mutual funds to disclose their proxy voting policies and records.

"The bulletin confirms that the securities regulators are going to bring transparency to the way that mutual funds vote their shares," said SIO Executive Director Eugene Ellmen. "This is an important issue for socially responsible investors, who have led the way to open up the proxy voting process."

The new proxy voting requirements, set out in Part 10 of National Instrument 81-106, will be implemented on July 1, 2005.  The new rules were published in a bulletin March 11 by the Canadian Securities Administrators (CSA), the national umbrella organization for securities regulators in Canada.

The rules state that at the end of each year on June 30, mutual funds must have prepared a proxy voting record.  This record has to include, among other requirements, information about whether the investment fund voted, and, if yes, how it voted and whether the vote was for or against the recommendations of management.  If the investment fund has a website, it must post the proxy voting record to the website no later than August 31 of each year.  In addition, an investment fund must promptly send the most recent copy of the investment fund's proxy voting policies and procedures and proxy voting record, without charge, to any security holder upon request by the security holder after August 31.

In addition to publishing the annual proxy votes, investment funds also are required to establish and publish policies and procedures on their proxy voting.  Among other things, these policies must include a standing policy for dealing with routine and non-routine matters.

"We are especially pleased that the CSA accepted our recommendation to have mutual funds file their proxy records on the web," Ellmen said. "This means that interested investors will be able to find out very easily through the internet how their mutual funds voted on important issues.  This will lead to a new era in transparency in mutual fund voting."

The new rules are similar to requirements put in place last year by the Securities and Exchange Commission.  The SEC and CSA have expressed concern that the lack of transparency in mutual fund proxy voting could lead to conflicts of interest in which funds may refrain from voting or vote with management on shareholder issues of governance, social responsibility or sustainability.

For more information, visit: 

http://www.osc.gov.on.ca/Regulation/Rulemaking/Current/Part8/rule_20050311_81-106_ni-oscb2810-supp.pdf.