The Ontario Securities Commission (the OSC) recently published
"OSC Staff Consultation Paper 15-401" which sets out a
proposed framework for an incentive-based whistleblower program.
This program aims at incentivising whistleblowers to report
Securities Act violations by offering a share of any monetary
sanction or settlement resulting from the disclosure. With this
publication, the OSC has also opened a 90 day comment period which
ends on May 4, 2015.
Under the proposed framework, the OSC has discretion to grant
eligible whistleblowers a financial award of up to 15% of monetary
sanctions or settlements, to a maximum award of $1,500,000.00.
Unlike similar regimes in other jurisdictions, the proposed
framework grants awards based on the quantum of the final
disposition, rather than on monies collected. The OSC hopes to
encourage greater reporting by providing whistleblowers greater
assurance that they will receive their reward.
In addition to the proposed whistleblower incentive payment, the
OSC has also indicated it intends to request the Ontario government
amend the Securities Act to provide specific whistleblower
protection. This protection would include three new provisions
that whistleblower retaliation would violate the Securities
Act, allowing OSC staff to commence a proceeding under section
that the whistleblower would have a civil right of action
against a retaliatory employer; and,
that contractual provisions designed to silence whistleblowers
If enacted, these provisions would grant the OSC broad
enforcement powers. On a finding of guilt under a section 127
proceeding, the OSC's powers would include ordering the
offender amend their workplace policies and practices, and pay a
penalty up to $1,000,000.00. The civil right to action would allow
a whistleblower to bypass the Ontario Labour Relations Board and
seek punitive and restorative damages. The third provision could
potentially make many confidentiality or non-disparagement clauses
in employment contracts unenforceable. The OSC has further
indicated a desire to extend these protections to whistleblowers
who solely use internal reporting mechanisms.
In its current form, the framework penalizes companies which
have ineffective internal whistleblower programs. The consultation
paper proposes that a company's failure to adequately address
an internal complaint may eliminate credit they may otherwise get
for cooperating with the OSC, and be used as an aggravating factor
when recommending sanctions. The OSC is also specifically inviting
comments on whether to require that whistleblowers must exhaust
internal mechanisms before reporting to the OSC.
Despite no other Canadian securities regulator having published
a comparable framework, the size of Ontario's market means this
initiative will have broad-reaching effects. Any company listed on
the TSX, or which makes filings to the OSC, may be subject to this
initiative when it comes into force. A similar regime by the
Securities Exchange Commission in the United States launched in
2011 has already generated over 10,000 tips. If this is any
indication, it is likely that once finalized this initiative will
generate a significant number of new investigations for the
Please feel free to contact Jordan Deering of our Fraud,
Corruption & Asset Recovery Group or Correna Jones of our
Employment & Labour Group if you would like to discuss the
application of this proposed framework to your particular
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