Law Times

Law TiMes • March 16, 2009 cently provided in-house counsel with a behind-the-scenes view of the way the regulatory body conducts investigations during a corporate counsel information session held in Toronto. Kelley McKinnon, now a Weighing co-operation and privilege on OSC investigations T BRIEF: INHOUSE COUNSEL BY KELLY HARRIS Law Times he former deputy direc- tor of the Ontario Se- curities Commission re- Swansburg, senior counsel with RBC Financial Group, told Law Times weighing co-operation with protecting corporate information is a "double-edged sword" and an ongoing challenge. "The constant struggle is how to balance, 'How can we co-oper- ate, we want to co-operate, we not only want to co-operate we want to be seen to be co-operating, but we may have bet the barn in litiga- Gowling Lafleur Henderson LLP partner, spoke of the bal- ance between disclosure and co- operation with the commission and the need for quicker investi- gations. She says it is important to understand investigators are under pressure to conclude their work in a timely fashion. "Effective enforcement has corporations may have very valid reasons for not disclosing certain documents. One issue is the threat of litigation and class action suits, again referring to human nature, she says it is understandable an in- vestigator may be suspicious being handed less than all the informa- tion from a company. "You are going to feel like says many of those motivations would be apparent if a lawyer took the time to study the commission and its decisions, however, hear- ing about them from someone who was inside provided valuable information on time constraints and performance metrics. "Hearing someone who has maybe you can't do a complete and full investigation if you are had to live with those and how they come to be applied and they approach investigations and You want to appear to be co-operative, and you do want to co-operate, you can't just throw out the window the ability to protect yourself and defend litigation. tion threatened in the background if not already filed?'" she says. Once again the companies to be timely enforcement," she says. "So it was never in anyone's best interest when investigations took years and years." The OSC is in charge of ad- ministering and enforcing securi- ties legislation in Ontario, with the goal of providing protection for investors against "unfair, im- proper, or fraudulent practices." In order to do this investigators are sometimes called upon to seek out corporate information. When this happens in-house counsel need to weigh the value of working co-operatively with investigators against holding what is deemed to be privileged information. Understanding OSC mandat- ed goals and requirements can help in-house counsel under- stand the sometimes-demanding nature of investigators. This in- cludes disclosure of information to the OSC. Disclosure can be seen to put co-operation with an investi- gatory body at odds with pro- tecting corporate information. McKinnon says market partici- pants sometimes have a "percep- tion of unfairness of the balance of power," if they follow legal principals they may feel they are at odds with the commission. "They are worried that not co- may fear using their legal rights to not disclose certain informa- tion may be detrimental in the long run, Swansburg says. "There is no easy answer," she not getting the whole picture, when in fact the motivation is usually not to try and hide in- formation, but try and protect privilege," she says. "You want to appear to be co- says. "There is this kind of mental- ity that says if you refuse to hand over information or you make a claim of privilege, it is going to be viewed as uncooperative." Swansburg calls it a "natural hu- man reaction," but also points out operative, and you do want to co- operate, you can't just throw out the window the ability to protect yourself and defend litigation." Overall, Swansburg says the session was invaluable, being able to learn what motivates OSC in- vestigators from the regulatory body's former deputy director. She enforcements is, I think, invalu- able to someone who is involved with OSC investigations and co-operating in other investiga- tions," Swansburg says. "So the insights into what they do and why they do it are very helpful." One insight McKinnon provided was on how corpo- rate counsel can benefit from investigations by helping OSC staff to better understand is- sues facing the market. Still, professionalism must be para- mount when it comes to a group GILBERTSON DAVIS EMERSON LLP BARRISTERS AND SOLICITORS practice restricted to CIVIL LITIGATION, INSURANCE LAW Angela Emerson John L. Davis operating fully will be held against them," she says. "That is probably a dialogue that needs to be had more openly between the com- mission and market participants . . . the commission is always en- titled to be tough, it is also always obliged to be objective." Key for any company under investigation is weighing what may be gained against what may be lost. Reputation may come into play in these circumstances, McKinnon says. "Anybody involved in re- John L. Davis Professional Corporation R. Lee Akazaki Jody W. Iczkovitz Jonathan J. Weisman Counsel: James E. Adamson 20 Queen Street West, Suite 2020 Toronto, Ontario M5H 3R3 Tel: (416) 979-2020 Fax: (416) 979-1285 sponding to an investigation needs to assess the particular circumstances," she says. "There will be many occasions when the highest degree of co-operation is going to be in the best interest of the company, it may save cost and reputation problems." The session also included Wen- dy Kelley, senior vice president, general counsel, and corporate secretary for Biovail Inc., and Sha- ron Haward-Laird, deputy gen- eral counsel BMO Capital Mar- kets, BMO Financial. Gowlings and the Association of Corporate Counsel hosted the session. ACC Ontario Chapter president Carla www.lawtimesnews.com email: office@gilbertsondavis.com PAGE 15 under investigation standing behind their legal rights. "In some circumstances they may be able to successfully edu- cate OSC staff about the cir- cumstances so that the staff take a different approach," McKin- non says. "There may be, on the other hand, times when there is a challenging issue that needs to be fought out and may only be resolved through a hearing. "When that happens certainly it is always staff 's responsibility to behave professionally, most people that understand litigation know that you can be tough, but still professional." When those situations occur LT the best course of action may be to move to a hearing to seek a resolution.

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