The Mutual Fund Dealers Association of Canada (MFDA) doesn’t have much to say yet about a British Columbia Securities Commission (BCSC) decision to censure the self-regulatory organization over how it solicits proxies.

“We are in the process of reviewing the BCSC decision with counsel and have no further comment at this time,” said Ken Woodard, director, communications & membership services, Mutual Fund Dealers Association.

The news about the BCSC’s censure has caused much furore in the industry with experts weighing in with sharp comments about the MFDA board for conducting the proxy solicitation process, terming the decision as dicey at best.

“Apart from whether pressuring members was the intent, it would have been obvious to an objective observer that the process was fraught with risk of members’ feeling pressure to vote, and to do so in favour of the amendments,” said Vancouver-based Stuart B. Morrow, a partner at law firm Davis LLP.

Morrow, who has been actively involved in contested meeting and proxy fights for over 20 years, said, “as such, it is inappropriate for the MFDA board and executive to play a partisan role in seeking members’ input on the corporate governance amendments proposed.”

The British Columbia Securities Commission (BCSC) criticized the manner in which the MFDA board went about seeking its members’ approval in October, 2009 of important bylaw amendments affecting future governance of the organization.

The commission found that the MFDA’s board and management actively solicited members’ support for the amendments, and stated: “The facts show that the process for directors chose to solicit proxies was calculated to maximize participation, not by all members, but only by those who would vote in favour.”

The commission went on to observe that, as the SRO for the mutual fund industry, the MFDA has the responsibility of establishing and enforcing rules of conduct for its members.

Exercising its jurisdiction as principal regulator of the MFDA, the BCSA issued several directives, including the requirement that the MFDA use an independent proxy solicitation firm to solicit proxies relating to members’ meetings and that members’ votes are to remain confidential and unknown to MFDA directors, officers and staff, all aimed at ensuring a process which “leaves no room to question the integrity of [the MFDA’s] governance, procedures and practices.”