On January 20, 2018, the Ontario Securities Commission (“OSC”) published proposed changes to OSC Policy 15-601, The Whistleblower Program (“Policy”) for a 60-day comment period, ending March 20, 2018 (“Notice”). The Notice clarifies the role of in-house counsel and the exceptions from ineligibility so they would not apply to in-house counsel in respect of matters that arise while the in-house counsel is acting in a legal capacity.
The Policy, which came into effect in July 2016, provides guidance on the OSC’s Whistleblower Program (“Program”). The Program is designed to encourage individuals to report and submit to the OSC information on serious securities-related misconduct. Under the Program, individuals who meet certain eligibility criteria and who voluntarily submit ‘original information’ to OSC staff regarding a breach of Ontario securities law may be eligible for financial compensation (whistleblower award), depending if the information submitted meets these criteria:
- If the information was of meaningful assistance to Staff in investigating the matter and obtaining a decision of the Commission under section 127 of the Securities Act (Ontario) (the Act) or section 60 of the Commodity Futures Act (Ontario) (the CFA); and,
- results in an order for monetary sanctions (i.e., administrative penalties and/or disgorgement orders) and/or voluntary payments of $1,000,000 or more.
The Policy also sets out the practices generally followed by the OSC Staff in administering the Program; the nature of the information that may be eligible for the payment of a whistleblower award and the criteria that would make an individual eligible for a whistleblower award; and the factors considered in determining eligibility for, and the amount of, a whistleblower award.
The Policy is not intended to override applicable provincial or territorial bar or law society rules or equivalent rules applicable in another jurisdiction or to incent misconduct on the part of in-house counsel. It has provisions that are intended to protect against conduct that would violate a lawyer’s professional obligations:
- the definition of ‘original information’ that may qualify for a whistleblower award expressly excludes information that a whistleblower has obtained through a communication that was subject to solicitor-client privilege;
- subsection 14(3) of the Policy provides that no whistleblower award will be provided for information that Staff determines is subject to solicitor-client privilege;
- subsection 15(1) of the Policy provides that a lawyer will generally be considered ineligible for a whistleblower award unless the disclosure of the information would otherwise be permitted by the lawyer under applicable provincial or territorial bar or law society rules or equivalent rules applicable in another jurisdiction (see s. 15(1) (c) and (d)). (This reflects that fact that in some jurisdictions disclosure by a lawyer may now or in the future be permitted under applicable law society rules or the equivalent.); and
- Part 4, item F of the Whistleblower Submission Form A requires in-house counsel to state whether disclosure of the information he or she is providing is permitted under applicable provincial or territorial bar or law society rules or the equivalent rules applicable in another jurisdiction.
The Policy contains exceptions from ineligibility for certain otherwise ineligible classes of individuals. They may be eligible for a whistleblower award if they fall within one or more of the exceptions set out in subsection 15(2) of the Policy, as follows:
- the whistleblower has a reasonable basis to believe that disclosure of the information to the Commission is necessary to prevent the subject of the whistleblower submission from engaging in conduct that is likely to cause or continue to cause substantial injury to the financial interest or property of the entity or investors;
- the whistleblower has a reasonable basis to believe the subject of the whistleblower submission is engaging in conduct that will impede an investigation of the misconduct; or
- at least 120 days have elapsed since the whistleblower provided the information to the relevant entity’s audit committee, chief legal officer, CCO (or their respective functional equivalents) or the individual’s supervisor, or, at least 120 days have elapsed since the whistleblower received the information, if in the circumstances the whistleblower received the information, the whistleblower became aware that one or more of those individuals were already aware of the information.
The Notice states that the exceptions apply to in-house counsel in situations where the employee serves both legal and non-legal functions within an organization and provides a whistleblower submission that relates to matters that arise while the in-house counsel is acting outside of their legal capacity.
The proposed changes:
- spells out that the exceptions arising from ineligibility in subsection 15(2) of The Policy would not apply to in-house counsel while the in-house counsel is acting in a legal capacity. This change also further affirms the fact OSC staff do not wish to receive information that is subject to solicitor-client privilege or the provision of which would otherwise be in breach of applicable provincial or territorial bar or law society rules or equivalent rules applicable in another jurisdiction.
- further clarifies that in Ontario, in-house counsel acting in a legal capacity are ineligible for a whistleblower award because their duty to protect the confidentiality of their clients’ information would preclude them from making a whistleblower submission under the rules governing the legal profession in the province.
The OSC notes that in some jurisdictions legal counsel are not prohibited from reporting client misconduct and in fact, may be required to report it. It also advises that when the proposed changes come into force, in-house counsel acting in a legal capacity will be ineligible for an OSC whistleblower award unless the disclosure would otherwise be permitted under applicable law society rules.
The proposals in the Notice should be read with the amendments introduces last November by the Government of Ontario provide for a civil cause of action for whistleblowers who experience a reprisal for cooperating with the OSC. The Ontario Securities Act and the Commodity Futures Act were amended to provide a civil cause of action for whistleblower who experience reprisals including the whistleblower being able to bring an action in the Superior Court of Justice or bring a complaint to be resolved by binding arbitration.
The notice of publication of proposed changes to OSC Policy 15-601, The Whistleblower Program, is available for download from the Ontario Securities Commission website.
OSC Policy 15-601, The Whistleblower Program, is available for download from the Ontario Securities Commission website.
For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.