OSC moves ahead with whistleblower policy

The Ontario Securities Commission has adopted a policy that could financially reward in-house counsel for disclosing information about corporate wrongdoing, despite the concerns of lawyers, legal scholars, and the Law Society of Upper Canada.

The new policy will make in-house counsel eligible for financial incentives of up to $5 million for reporting wrongdoing to the regulator’s new whistleblower office in certain circumstances.

Lawyers were included in the policy, even with concerns voiced by the LSUC and members of the legal community, who said the policy will cause confusion for lawyers, who are prohibited from disclosing information to third parties in most cases.

In an interview with Law Times, Kelly Gorman, the head of the new whistleblower office, defended the decision to include in-house counsel in the policy, saying the awards will not encourage lawyers to abandon their professional responsibilities.

“I really believe that these individuals certainly have the sophistication to look at the facts and the circumstances that they’re in, [and] look at what their professional rules are,” she says.

“Nobody is obligating anybody to come forward as part of our program. We’re just simply not barring them from reporting if they can get themselves comfortable with the conditions and the exceptions as outlined in our policy.”

The policy, which Gorman stresses is voluntary, makes in-house counsel eligible for awards under three exceptions.

The first exception is if the lawyer has a “reasonable basis” to believe that disclosing the information to the OSC is necessary to prevent conduct “that is likely to cause or continue to cause substantial injury to the financial interest or property of the entity or investors.”

The second is if the in-house counsel has a reasonable basis to believe the subject of his or her submission is engaging in conduct that will impede an investigation.

The last exception would make lawyers eligible if they had to report misconduct to a supervisor or chief legal office and no action is taken after 120 days or if that amount of time passes after they become aware of misconduct that has already been reported up the ladder internally.

External counsel will not be eligible to receive the financial incentives, “unless disclosure of that information would otherwise be permitted by a lawyer under applicable provincial or territorial bar or law society rules, or the equivalent rules applicable in another jurisdiction.”

However, the law society’s Rules of Professional Conduct ban lawyers from disclosing a client’s information unless certain narrow exceptions apply — including if doing so will prevent “an imminent risk of death or serious bodily harm” or if another lawyer has committed a criminal offence.

Lawyers can also disclose information if they are required by law.

Lawyers and legal scholars who oppose including in-house counsel say it is hard to imagine circumstances in which lawyers would be able to disclose information to the OSC without breaching their obligations to solicitor-client privilege.

“It’s a little bit difficult to imagine a scenario in which a lawyer acting as in-house counsel in that capacity would be able to disclose information consistent with their obligations to protect confidentiality under the rules of professional conduct,” says Amy Salyzyn, a law professor at the University of Ottawa.