On October 28, the Ontario Securities Commission released a draft policy outlining its proposed whistleblower program for a 60-day comment period.1 The proposed whistleblower program addresses a number of the concerns voiced in response to the OSC’s consultation paper on the topic, but continues to raise questions for market participants. The 60-day comment period closes on January 12, 2016.
What You Need To Know
- The program continues to permit whistleblowers to bypass internal compliance systems. While the OSC "encourages" whistleblowers to report potential violations of Ontario securities law through their own internal compliance and reporting mechanisms, it does not require internal reporting as a condition to receiving a whistleblower award. The fact that a whistleblower does report internally can be considered as a factor to increase an award, but the lack of an internal report will not be used to decrease an award.
- Exceptions for compliance, auditors, directors and officers, in-house counsel. Generally, individuals filling these roles continue to be ineligible to receive whistleblower awards. However, the program contains certain exceptions, including where whistleblowing is necessary to prevent substantial injury to the entity or investors, the whistleblower believes the subject of the information is engaging in conduct that will impede an investigation, or the whistleblower reported the information internally and 120 days have elapsed. Simply allowing the passage of time as an exception for these types of individuals may detract from the use of internal compliance systems.
- This aspect of the proposal, particularly its extension of the exceptions to in-house counsel, may be viewed as controversial. While disclosure of information is likely to be contrary to a lawyer’s duty, in-house counsel often play both legal and business roles, making it potentially difficult to distinguish between information received in their role as counsel and in their role as business person.
- Retaliate against retaliators. In its notice on the policy, the OSC has made clear that Commission Staff may prosecute employers that retaliate against employees who submit information under the program under its general public interest jurisdiction. This may cause difficulties for employers who have other cause to discipline or terminate an employee, where that employee has also submitted information under the whistleblower program.
- Whistleblowers to submit documents in their possession. Commission Staff may request whistleblowers to provide them with documents, unless those documents are not in the whistleblower’s possession or control. At the same time, the OSC expects employers not to discipline employees who report information under the program. This continues to place employers in the difficult position of addressing breaches of their internal confidentiality or Code of Conduct policies while adhering to the OSC’s expectations with respect to retaliation. We recommend that employers consider whether their existing privacy policies would cover submission of information to the OSC.
- Culpable whistleblowers can get paid. The OSC will allow whistleblowers who are complicit in violating Ontario securities law to receive a whistleblower award, though the quantum of the award may be decreased, depending on the individual’s conduct. The OSC proposes to retain the right to bring an enforcement proceeding against a culpable whistleblower, and to set off any monetary sanctions it may levy from a whistleblower award it has paid.
1 OSC Notice and Request for Comment – Proposed OSC Policy 15-601 – Whistleblower Program, dated October 28, 2015.
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