The proposed amendments to the Act respecting the Autorité des marchés financiers intended to protect whistleblowers could have significant and potentially problematic consequences under certain circumstances.
Among the numerous legislative amendments included in Bill 141 (the “Bill”), which proposes a reform of the laws governing the Quebec financial sector, the legislator proposes amendments to the Act respecting the Autorité des marchés financiers (which will be renamed the Act respecting the regulation of the financial sector) to protect persons wishing to report wrongdoings to the Autorité des marchés financiers (the “Authority”).
Following the example of the Ontario Securities Commission, the Authority implemented a whistleblower program in June 2016. Contrary to Ontario, Quebec’s program does not give financial awards to whistleblowers, but it does guarantee a framework that ensures confidentiality and protects whistleblowers against reprisals. However, no legislative amendment guaranteeing these protections has been introduced until now.
The Bill states that it is forbidden to take a reprisal or to threaten to take a reprisal against a person who, in good faith, makes a disclosure to the Authority or who cooperates in an investigation. It specifies that the demotion, suspension or dismissal or transfer of the employee is presumed to be a reprisal.
The Bill also states that persons who make a disclosure may do so despite any disclosure constraints provided elsewhere in Quebec laws, such as the Act respecting the protection of personal information in the private sector (chapter P-39.1). The Bill goes further by providing that persons who make a disclosure may do so despite any provision of a contract or duty of loyalty or confidentiality that may be binding on them. The Bill specifies, however, that the authorized waiver of professional secrecy does not apply to professional secrecy between a lawyer or a notary and a client.
The waiver of professional secrecy, therefore, applies to all other professionals, such as accountants. If this provision is adopted as proposed, it may create significant challenges for auditors in establishing the relationship of trust with clients and their audit committees, in particular, because transparent communication of information between a client and an auditor is a key ingredient to audit quality.
The proposed release from any duty of loyalty may also have major, albeit unintended, consequences regarding the governance of the corporations and financial institutions regulated by the Authority. For example, the individuals sitting on the boards of directors of these legal persons have a duty of loyalty to them. Sound governance is based on transparent communication between senior management and its board. In addition, internal whistleblowing systems implemented by the vast majority of corporations and financial institutions typically provide that audit committees have the ultimate responsibility for these systems. Releasing directors from their duty of loyalty could undermine the climate of trust and possibly impede the transparent communication of information that the board requires to perform its duties, particularly in cases where it must handle a disclosure of a contravention.
Also, it is unclear whether these proposed amendments which are contained in a Québec law would be effective in the case of corporations and financial institutions not incorporated under a Québec statute, as the duty of loyalty of directors is provided for in most corporate statutes in addition to the Civil Code of Québec.
In all of these cases, the increased concern that corporate leaders may have, whether rightly or wrongly, regarding prompt, transparent communication with their auditors or boards of directors could result in a decline in audit quality and the ability of boards of directors to fully perform their role.
By Clemens Mayr and Sonia J. Struthers
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