Update on the OSC Whistleblower Program: Proposed Amendments Focus on Eligibility of In-House Counsel
January 25, 2018
The Ontario Securities Commission (OSC) adopted OSC Policy 15-601 – Whistleblower Program (Policy), creating its Whistleblower Program (Program) in July 2016. The Program is intended to encourage whistleblowers to report information on serious securities-related misconduct, including by offering monetary rewards to whistleblowers.
This bulletin looks at two developments in respect of the Program, including a proposed amendment to the Program relating to the eligibility of in-house counsel.
As described in our September 2016 Blakes Bulletin: OSC’s Recently Launched Whistleblower Program: A Walkthrough, whistleblowers who voluntarily report information to OSC staff relating to a breach of Ontario securities law may be eligible for an award where the penalty or settlement amount exceeds C$1-million.
For penalties or settlements ranging between C$1-million and C$10-million, the monetary award may be up to C$1.5-million, and where the penalty is C$10-million or more, the award may be up to C$5-million.
Also in connection with the Program, provisions were added to the Securities Act (Ontario) to provide whistleblowers with protection against reprisals. These anti-reprisal provisions prohibit employers from, among other things, taking retaliatory action against employees who seek advice on whistleblowing or who disclose information to the OSC, law enforcement agencies or recognized self-regulatory organizations.
In its current form, the eligibility requirements in the Policy arguably make in-house counsel (among certain other classes of provisionally excluded persons) eligible for an award. In particular, in-house counsel is potentially eligible where:
- They have a reasonable basis to believe disclosure is necessary to prevent substantial injury to the financial interests or property of the entity or investors;
- They have a reasonable basis to believe the subject of the submission is engaged in conduct that will impede an investigation of the misconduct; or
- It has been a minimum of 120 days since the whistleblower reported the information to the audit committee, chief legal officer or chief compliance officer of the entity (or it has been a minimum of 120 days since the whistleblower received the information and the whistleblower became aware that one or more of the individuals was already aware of the information).
The proposed change to the Program would stipulate that in-house lawyers are never entitled to a whistleblower award for information obtained in connection with the provision of legal services where the disclosure would be in contravention of restrictions under applicable legal profession rules.
The OSC has proposed the change in response to comments, received from the Law Society of Ontario and other stakeholders, expressing concern about in-house lawyers disclosing information in contravention of applicable law society rules. Amongst the concerns raised is that the Policy could be read as suggesting that there are scenarios where law society rules permitted lawyers to act as whistleblowers against their own clients.
In its proposed change and request for comments, the OSC has clarified that the Policy was never intended to override law society rules. The OSC has also stated that the change is intended to clarify that the OSC does not want to receive information subject to solicitor-client privilege, and that the duty of confidentiality precludes in-house (and other) lawyers from making a whistleblower submission on the basis of such privileged information.
The comment period will run until March 20, 2018. If the amendment is enacted as proposed, the criteria noted above would not apply to in-house lawyers acting in a legal capacity.
CIVIL CAUSE OF ACTION
In its 2017 Budget, the Ontario government revealed that one of its legislative initiatives will involve amendments to securities law to create a civil cause of action for whistleblowers where a reprisal is taken against them contrary to securities or commodities futures law. The civil cause of action will accompany and enhance the anti-reprisal protections noted above.
While clear statistics on the activity of the Program are not available, in its most recent annual report, the OSC states that under the Program “the Office of the Whistleblower has received several credible tips and high-quality information.” Given that regulatory investigations are often conducted over a lengthy period of time before a resolution is reached, the level of activity within the Program should become more apparent over time.
For more detail on the Policy, the Program and comments received during the consultation process, please see our previous Blakes Bulletins:
- OSC’s Recently Launched Whistleblower Program: A Walkthrough
- Ontario, Quebec Securities Regulators Announce Whistleblower Programs Launch
- Commenters Reiterate Concerns about OSC’s Proposed Whistleblower Program
For further information, or to discuss the appropriate steps that organizations should take to avoid pitfalls under the Policy, please contact:
Doug McLeod 416-863-2705
Ryan Morris 416-863-2176
or any other member of our Securities Litigation group.
Blakes and Blakes Business Class communications are intended for informational purposes only and do not constitute legal advice or an opinion on any issue.
We would be pleased to provide additional details or advice about specific situations if desired.
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