On January 18, 2018, the Ontario Securities Commission (OSC) published and requested comments for a proposed change to OSC Policy 15-601 Whistleblower Program (Policy). The Whistleblower Program came into effect in July 2016 and is intended to encourage individuals to report information on serious securities-related misconduct to the OSC to prevent or limit harm to investors, in exchange for financial compensation.
Under the Whistleblower Program, individuals who report original information that is of meaningful assistance to OSC staff in investigating the matter and obtaining a decision under section 127 of the Securities Act (Ontario) (Securities Act) or section 60 of the Commodity Futures Act, and resulting in sanctions of $1,000,000 or more, may be eligible for an award between 5 and 15% of the total sanctions imposed and/or voluntary payments made in the relevant proceedings.
Concurrent with the Policy coming into effect, the Securities Act was amended to provide Whistleblowers with protection against retaliatory action by employers for seeking advice on whistleblowing or for reporting securities violations.
Proposed Change: In-House Counsel Eligibility
As the Policy stands, those who provide legal services to an employer that is the subject of the whistleblower submission, i.e. legal professionals working in-house, are permitted to make a submission where:
- the whistleblower has a reasonable basis to believe that disclosure of the information is necessary to prevent substantial injury to the financial interest or property of the entity or investors of the entity to which the submission relates;
- the whistleblower has a reasonable basis to believe that the violating entity is engaging in conduct that will impede an investigation of the misconduct; or
- at least 120 days have passed since the whistleblower reported the information to the entity’s audit committee, chief legal officer, CCO or the individual’s supervisor, or at least 120 days have passed since the whistleblower learned that one or more of those individuals were already aware of the information.
In-house counsel often work in a unique legal/business advisor role. Consequently, the Law Society of Ontario had raised concerns that allowing in-house counsel to be eligible for the Whistleblower Program could encourage reporting on information that is subject to solicitor-client privilege and go against other such professional obligations. In response, the proposed change would make in-house counsel acting in their legal capacity ineligible for the Whistleblower Program. In-house counsel acting in a non-legal capacity would continue to be eligible where they meet the above exemption requirements and where the disclosure would not go against applicable law society rules. How this distinction is to be made is less clear.
Comments on the proposed change will be received by the OSC until March 20, 2018.