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Scotiabank fails to remove top CI executives from board

Bill Holland, CEO of CI Financial

SIMON HAYTER/The Globe and Mail

Tensions between Bank of Nova Scotia and CI Financial Corp. flared up again on Wednesday after the bank failed to unseat the mutual fund giant's top two executives from CI's board of directors.

Scotiabank, CI's biggest shareholder, voted against the nomination of the firm's chief executive officer Stephen MacPhail and executive chairman Bill Holland during CI's annual shareholders' meeting.

Despite the bank's opposition, the two executives won election to the board, while non-bank shareholders approved the extension of CI's shareholder rights plan, known as a poison pill, to 2014.

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Scotiabank, which owns a 36-per-cent stake in CI, lost a battle against the fund company last week before the Ontario Securities Commission on the question of whether the bank should be eligible to vote on the poison pill. The bank opposes the rights plan, which restricts how many CI shares it can buy and sell.

"I think it's truly idiotic for them to vote against [us]" Mr. Holland said after the meeting. It is "not inconceivable" that other shareholders could have sided with the bank and won, and that would have had a "huge impact" on the company, he said.

"When a major Canadian bank … acts in this mean-spirited and petty way … at some point the [bank's]shareholders have to step in, and say this is a waste of our assets," Mr. Holland said.

The bank has a $2.4-billion investment in CI, and yet has "turned around and voted against the two senior executives who for 17 years have built the most impressive financial services track record in North America," he said.

Scotiabank bought its CI stake in 2008 from Sun Life Financial Corp., which had two board seats. But the bank was denied seats because it is viewed as a competitor since it too sells mutual funds.

Ann DeRabbie, a spokeswoman for Scotiabank, would only say that "it is customary to not comment on a confidential shareholder vote."

Last Thursday, the OSC overturned a Toronto Stock Exchange decision to allow the bank, which bought CI rival DundeeWealth Inc. this year, to participate in the midterm vote on the rights plans.

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CI's victory means that Scotiabank, which voted for the poison pill in 2008, can't sell more than 20 per cent of its stake in CI to a single buyer, or acquire more shares without making the same offer to all shareholders.

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