Page 27 - CCCA 226419 Magazine Fall 2014

{ Feature } “ self-interest is hardly a stranger to the security or investment business.” Excerpt from TELUS litigation saga notes, Supreme Court rulings. the many Facets to resolVe Alex Moore, an M&A lawyer at Davies, says, “It’s hard to The Canadian Securities Administrators, the umbrella group make a bright-line rule covering situations where someone may for provincial securities commissions, is currently examining have crossed the line.” the proxy voting system with a view to the “accuracy, transpar- Olasker adds the question of determining alignment of ency and integrity of the proxy voting infrastructure.” The con- shareholders is a “very subtle one” and better left to the mar- sultation paper notes that shareholder voting is “fundamental kets to determine than securities commissions. “How far can to, and enhances the quality and integrity of, our public capital you look at individual motivations when someone votes on a markets.” However, the impact any changes will have on empty transaction?” she wonders. “Where do you draw the line around voting remain to be seen and are still likely years away. what kind of voting is appropriate?” Moore and Olasker say giving courts greater discretion to consider empty voting when weighing the fairness of a plan, arrangement or transaction makes better sense than prescribing it in securities regulations. However, Barry thinks that without some type of move- “it’s very hard to tell ment to promote at a minimum greater disclosure in securi- how often it happens. ties rules around holdings and votes, empty voting will only it doesn’t have to be get worse. “The derivative markets are very large and con- tinue to get bigger. I think it is going to get easier to engage disclosed.” in empty voting.” For Pasparakis, the advice to corporate counsel for now is Jordan Barry, associate professor of law, University of San Diego simple: Be on guard. “Canadian companies need to understand School of Law that there is a breed of investor that is now in the marketplace that is well-funded, highly sophisticated and driven by oppor- tunism. They are agnostic in every sense of the word. These guys are looking for companies that are a little bit sleepy and Others are not so quick to see empty voting regulated by se- haven't really stress-tested their transactions.” ❚ curities commissions. That’s because empty voting can arise in a number of different scenarios, from shorting stocks to simply borrowing or buying the right to vote them, which is part of the way that the capital markets work. For example, investment f rms will often lend shares to earn extra premiums and im- “it’s hard to make a prove returns for investors. bright-line rule covering Moreover, the capital markets themselves are a den of con- f ict. Money managers can easily hold positions in different situations where stocks and f nd themselves at odds on votes. For instance, say someone may have an investment bank puts together a deal that will enhance Sam- sung at the expense of its competitor, Apple. An institutional crossed the line.” fund, possibly run by the same investment bank, might hold Alex Moore, M&A lawyer, more Apple stock than Samsung and determine that it isn’t in Davies Ward Phillips & Vineberg the interest of its fund holders to back the Samsung deal be- cause it will crush the Apple share price. They have a f duciary duty to their investors to do what’s right. It gets even messier if competitors bid on the same company. Which deal does a fund manager back? As one of the B.C. Supreme Court rulings in the Jim Middlemiss is a writer based in London, Ontario. TELUS litigation saga notes: “Self-interest is hardly a stranger to the security or investment business.” Canadian Corporate Counsel assoCiation | CCCa-aCCje.org 27