In 2016, the Ontario Securities Commission (OSC) adopted OSC Policy 15-601 (the Policy) which established its Whistleblower Program (the Program). The Program is intended to encourage whistleblowers to report serious violations of securities law, such as insider trading, fraud, misleading financial statements or trading-related misconduct. Under the Program, individuals who voluntarily offer such information to the OSC may be eligible for financial compensation if the information (i) was of meaningful assistance to the OSC in investigating the matter and obtaining a decision under section 127 of the Securities Act (Ontario) or section 60 of the Commodity Futures Act (Ontario), and (ii) results in an order for monetary sanctions and/or voluntary payments of $1,000,000 or more.
Ineligibility of In-House Counsel
Last month, the OSC proposed an amendment to clarify the eligibility of in-house counsel for the payment of a whistleblower award. In specific, the amendment will make in-house counsel ineligible for a reward where the reporting lawyer proffers information in breach of the applicable provincial/territorial bar or law society rules. This amendment is intended to protect against the violation of counsel’s professional obligations. According to the OSC’s notice, the following aspects of the policy are aimed at discouraging any violation:
- 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 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; 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 only instances in which in-house counsel would be eligible for a reward are when reporting client misconduct would otherwise be permitted under applicable law society rules or if in-house counsel is not acting in a professional legal capacity. In determining whether counsel is eligible in the former scenario, counsel will have to carefully consider the circumstances and capacity in which they acquired the information. As a result of the proposed changes, issuers may be able to take comfort in the protections provided by solicitor-client confidentiality.
The OSC will be accepting comments on the proposed amendments until March 20, 2018.
The author would like to thank Joseph Palmieri, articling student, for his contribution to this article.