- The Ontario Securities Commission (OSC) has proposed changes to OSC Policy 15-601 Whistleblower Program which will clarify that in-house counsel will not be eligible for a whistleblower award if reporting information in breach of bar or law society rules.
- The Securities Act (Ontario) has been amended to include a civil cause of action for whistleblowers where a reprisal is taken against them in violation of securities laws.
- As previously discussed, the OSC’s whistleblower program launched in July 2016 with the intent of encouraging the reporting of serious securities-related misconduct.
Proposed Amendments to OSC Policy 15-601
On January 18, 2018, the OSC published for comment proposed amendments (Proposed Amendments) to OSC Policy 15-601 Whistleblower Program (the Policy). These amendments provide that the Policy is not intended to take priority over any applicable provincial or territorial bar or law society rule that would prevent in-house counsel from disclosing confidential or privileged client information. The OSC does not intend the Policy to incentivize any potential breach of such rules on the part of lawyers, nor does it wish to receive information subject to solicitor-client privilege.
Consequences of the clarification
The Proposed Amendments would clarify that the exceptions to ineligibility in the Policy do not apply to in-house counsel in respect of matters that arise while he or she is acting in a legal capacity. However, if an in-house counsel also fulfils a non-legal role within an organization, participation in the whistleblower program may still be possible with respect to matters arising in the context of his or her performance of that non-legal function.
These clarifications will likely be positively received by in-house counsel who may find themselves in sensitive situations where they may be required to balance their duty to comply with rules of professional conduct and their obligation to report misconduct for violations of securities laws. If a disclosure cannot be made under applicable bar or law society rules, it cannot be made under the OSC whistleblower program either. As the OSC notes, however, in some jurisdictions certain forms of client misconduct may or must be reported under bar or law society rules – in those cases, it may be possible for an in-house counsel to participate in the whistleblower program.
Issuers will also appreciate the reassurance that they remain able to seek advice from their in-house counsel without fear that their counsel might have a financial incentive to breach the confidentiality that would be expected in a solicitor-client relationship under applicable bar or law society rules.
The OSC is soliciting comments on the proposed amendments to the Policy until March 20, 2018. For further information, please see OSC Notice and Request for Comment Proposed Change to OSC Policy 15-601 Whistleblower Program (January 18, 2018).
Ontario Securities Act Gets a New Civil Cause of Action for Retaliation
In its 2017 Ontario Economic Outlook and Fiscal Review, the Ontario Government stated its intention to amend Ontario securities laws to provide a civil cause of action for whistleblowers where a reprisal is taken against them in violation of securities laws. Effective December 14, 2017, the Securities Act (Ontario) was amended to add a procedure for an employee to complain to an arbitrator or to the court if the employee has been the subject of a prohibited reprisal, including the orders that the arbitrator or court may take. The burden of proof that a person or company did not take a reprisal against an employee lies with that person or company.
As previously discussed, protections from retaliatory measures in connection with whistleblowing activities were added to the Securities Act (Ontario) in 2016 which prohibit persons or companies from taking action against an employee who has sought advice about, expressed an intention to or provided information to the person or company, the OSC, a recognized SRO or a law enforcement agency about an act of the person or company that has, is or will occur that the employee believes is contrary to Ontario securities law. Similar anti-reprisal measures have been introduced in Quebec and are expected to be adopted in Spring 2018.
Taking Action: Internal Whistleblower Policies
The increased focus on whistleblower programs raises an opportunity for issuers to review their own internal whistleblower procedures to ensure that the way in which complaints are handled do not contravene any existing anti-reprisal provisions of the Securities Act (Ontario). The best risk mitigation strategy is for an issuer to ensure that its own internal procedures are effective. This includes being easily accessible and transparent, as well as effective in properly receiving, documenting and addressing complaints, and ensuring that employees in a management position are properly trained to deal with complaints.