Temporary guidelines issued by the Order regarding disclosures provided for under the Act respecting the regulation of the financial sector
Since June 13, 2018, CPAs are authorized under section 17.0.1 of the Act respecting the regulation of the financial sector1 [PDF] to disclose to the Autorité des marchés financiers (AMF), despite professional secrecy, any contravention of an Act enforceable by the AMF [PDF]. Given the importance of properly preserving professional secrecy in order to ensure the protection of the public, the Order has since initiated legal action before the courts to have section 17.0.1 declared unconstitutional and inoperative in respect of its members.
Section 17.0.1 does not create any obligation to disclose. Like anyone else, CPAs have the ability to make a disclosure to the AMF whenever they become aware of or suspect that an Act enforceable by the AMF has been contravened. However, given that the act, as it was adopted, does not include any framework for determining whether the lifting of professional secrecy is appropriate to disclose an offence, the guidelines issued by the Order are intended to guide CPAs in their assessment pending a ruling by the courts.
Offences that come to CPAs’ knowledge in the practice of their profession are often caused by inadvertent errors, ignorance of the law or weaknesses in internal control processes.
CPAs who detect real or potential offences should first assist their client in finding solutions to correct the situation. They must balance the importance of protecting the public from serious offences likely to cause substantial financial injury to investors, including small investors, with the importance of maintaining a relationship of trust with their clients, while taking into account internal control processes and helping their clients improve them.
CPAs who, in the practice of their profession, become aware or suspect that an entity overseen by the AMF has committed, or is about to commit, an offence must take critical steps before availing themselves of the authorization granted under the Act respecting the regulation of the financial sector to disclose the situation to the AMF, despite professional secrecy. During the discussions concerning Bill 141 before Quebec’s parliamentary commission, the Finance Minister stated that the purpose of section 17.0.1 was to generate quality whistleblowing reporting for severe offences.
Principle 1: CPAs must act in good faith when taking on the role of whistleblower
This obligation applies to all members of the public, not just to CPAs. The Act provides for immunity to whistleblowers, but does not protect those who make disclosures in bad faith (i.e. with a view to intentionally harm others or knowingly making baseless disclosures).
Principle 2: CPAs must assess the severity of the offence and its consequences
Assessing the severity of an offence and its consequences will guide the CPA throughout the process leading to the disclosure or not of the situation internally or to the AMF. Minor offences that do not impact financial statements should not be treated the same way as offences of high objective seriousness, such as cases of fraud, collusion or corruption.
Principle 3: Whenever possible, CPAs should first inform the client of the offence
Before considering whether to communicate information protected by professional secrecy to the AMF, a CPA must first report the offence to the client, unless the situation makes this impossible, as described in principle 5.
If the client is not a natural person, the CPA should make the disclosure to the client’s representative with whom the CPA has a relationship as part of the provision of professional services. If the CPA subsequently becomes aware that the client did not remedy the illegal situation, the CPA should inform the appropriate direct authority and, ultimately, those charged with governance.
Principle 4: Only offences of a certain severity may justify the lifting of professional secrecy allowing disclosure to the AMF
When a CPA discloses a situation internally, and the client has not taken any measures to show good faith or an intention to remedy the situation, the CPA must consider whether the situation warrants disclosure to the AMF. The Order believes that only offences of a certain severity as described below could be disclosed to the AMF despite professional secrecy:
- a serious breach that has a material effect on the financial statements of an individual or a company, or is likely to affect the company’s ability to continue as a going concern; or
- a breach that has caused or is likely to cause substantial financial injury to the individual or company contemplated in the previous paragraph, or a third party.
Principle 5: In case of emergency, CPAs can make a disclosure directly to the AMF
CPAs can disclose information protected by professional secrecy directly to the AMF when they have reasonable grounds to believe that the situation is of an urgent nature. This can apply:
- to prevent serious injury to the entity, investors; or
- when it is clear that those charged with governance are aware of a serious offence, as described in principle 4, or are involved in it.
Principe 6: CPAs should seek the assistance of the syndic of the Order in their assessment
When circumstances permit, CPAs should consult a lawyer or contact the Order’s Office of the syndic by email at firstname.lastname@example.org for assistance in determining what they should do before disclosing confidential information.
Principle 7: CPAs should take the following steps when disclosing an offence to the AMF despite professional secrecy
- Use a method of communication that ensures the confidentiality of the information under the circumstances; and
- Inform the person to whom they are making the disclosure that the information is protected by the CPA’s duty to professional secrecy.
Principle 8: Document the rationale and the steps takenWhen CPAs decide to disclose an offence to the AMF, they should record their rationale and steps taken by documenting in writing the following information as soon as possible:
- the name of the person to whom the information was communicated, the purpose of the communication, the date and time the information was communicated and the communication method used;
- the steps taken by the chartered professional accountant before communicating the information to a third party or the reasons the CPA did not take any steps;
- the reasons for the decision to communicate the information.
1. CQLR, c. A-33.2.