Canadian Lawyer InHouse

JANUARY 2016 6 INHOUSE News Roundup Lawyer concerned about blindside allegations under OSC whistleblower program S ecurities litigators are expressing con- cerns about the Ontario Securities Commission's newly released whistle- blower policy that they believe could lead employees, offi cers, and even legal advisers to blindside management with ostensibly anonymous reports to the regulator. The policy proposal, released Oct. 28, in- creases the maximum reward to $5 million from a previously proposed $1.5 million, although the higher amount can only be achieved if the information results in fi nes or payments worth upward of $35 million. While the maximum payout has been raised, it still falls short of the tens of mil- lions paid out by the U.S. Securities and Exchange Commission, and it may not be enough to encourage senior offi cers at large corporations, who commonly earn more than $10 million a year, to risk their careers, a lawyer suggests. "The amounts are still low compared to the SEC program, but you know, I think it's a step in the right direction," says Linda Fuerst, a securities litigator at Norton Rose Fulbright Canada LLP. "If the commis- sion is serious about providing meaningful incentives to individuals, particularly in se- nior positions, to be reporting serious mis- conduct, then they're going to have to fi nd another source of funding and increase the maximum award." Perhaps a bigger issue, says Fuerst, is that the new whistleblower policy gives compa- nies little opportunity to look into allega- tions internally before being confronted with a high-profi le public investigation. Under the program, employees can report misconduct directly to the OSC without go- ing to their supervisor or internal compli- ance offi cer. Senior offi cers, directors, auditors, and le- gal advisers are generally excluded from the program, but they can take advantage of it in specifi c circumstances, such as situations in which they believe the organization is on the verge of engaging in misconduct that "is likely to cause substan- tial injury to the fi nan- cial interest or property of the entity or investors." With no requirement by whistleblowers to report internally fi rst, a company may be taken completely off guard by the allega- tions. "There's a huge benefi t to encourage individuals to report fi rst internally to give the organization an opportunity to look at the allegations, and if necessary, conduct an appropriate internal investigation and decide whether there's any merit to them before the regulators get involved," says Fuerst. Fuerst acknowledges that many employ- ees may have reason to fear retaliation from managers who may be involved in miscon- duct. In those cases, however, whistleblow- ers should be required to explain to the commission why they didn't report the al- legations internally fi rst. "I think that what needs to be done is to require that a whistleblower report internally or be able to provide a reasonable explanation for why the whistleblower didn't," she says. "If the whistleblower says, 'I'm in a small shop and we didn't have any program for this' or 'I was legitimately afraid of retaliation and here is why, and I can explain that' then, of course, they should still be able to qualify." Fuerst also points out that anonymity can only be guaranteed at the reporting stage. In the event that allegations lead to charges and subsequent proceedings, the defendant will have a right to disclosure. Without the identity of the whistleblower, the case may fall apart along with any potential reward. "It's going to be inevitable in many of these cases that the identity of the whistleblower is going to end up being part of that disclo- sure that has to be made to the respondents in order for them to have an opportunity to defend the allegations appropriately," says Fuerst. "So that's why the OSC can't give any ironclad guarantee of anonymity." IH - David Dias Canadians gearing up to go after spammers in 2017 A n online poll suggests 54 per cent of Canadians would consider taking legal action for violations of Cana- da's anti-spam legislation. That response seems to be fuelled by numbers that show almost 60 per cent say they haven't received less spam since the leg- islation came into effect on July 1, 2014. Although the Canadian Radio-television and Telecommunications Commission has issued fi nes to a number of companies for violations, Canadians will be able to fi le law- suits against businesses for violations when the transition period ends on July 1, 2017. Conducted by Google Consumer Surveys in August for Toronto-based itracMARKET, a software company that provides compliance tools for businesses, the poll is based on 1,000 responses from across the country. "We clearly do expect there will be op- portunistic litigation and we expect it will be in the form of class action lawsuits," says Martin Kratz, a partner at Bennett Jones LLP in Calgary. Kratz says part of the problem for com- panies is the "considerable ambiguity" about how the law works because of the complex interaction between the exemptions in place, the regulations, and the act itself. Lawyer concerned about blindside whistleblower program likely to cause substan- tial injury to the fi nan- cial interest or property of the entity or investors." "I think that what needs to be done is to require that a whistleblower report internally or be able to provide a a small shop and we didn't have any program for this' or 'I was legitimately afraid of retaliation and here is why, and I can explain that' then, of course, they

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