A British Columbia Securities Commission panel is taking the Mutual Fund Dealers Association of Canada (MFDA) to task over the SRO’s actions ahead of a contrversial by-law change to extend the term limits for its public directors.

Prior to the vote, MFDA staff contacted members to solicit proxies for their vote on the extensions.

Reviewing the MFDA’s decisions following an annual general meeting and the solicitation process it conducted for a special general meeting of its membership in October 2009, the panel believes the MFDA failed to consider how the solicitation of proxies by an SRO from its members differed from a solicitation by a company from its shareholders.

The panel advised the MFDA to 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.

“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 stated in its decision.

The panel made a point of stating that the MFDA is an “effective and credible regulator of mutual fund dealers”, their findings were related to the specific issue at hand and the MFDA’s internal governance concerning that matter alone.