Staff of the Ontario Securities Commission (OSC) is considering
introducing a whistleblower program to encourage reporting of
breaches of Ontario securities law. The program, if implemented,
would be the first of its kind for securities regulators in Canada
(although whistleblower programs have been implemented in Canada in
the context of tax and competition legislation).
Staff is requesting comments on its proposal by May 4, 2015.
Staff 's stated objectives for the program, which are
outlined in Staff Consultation Paper 15-401 –
Proposed Framework for an OSC Whistleblower Program are
motivate those with inside knowledge
or information relating to possible serious breaches of Ontario
securities law (and that might otherwise not be available to Staff)
to share that information with Staff,
increase the number and efficiency of
complex securities law cases investigated and brought forward by
motivate issuers and registrants to
self-report misconduct to receive the benefit of the OSC's
credit for cooperation program (which would not be available if the
misconduct is first reported to Staff by a whistleblower).
Building significantly on the model adopted in the United States
by the Securities and Exchange Commission (SEC), which is
attracting attention in the context of large payouts being made to
whistleblowers, Staff is proposing a framework for the program with
the following basic elements:
Eligibility. The whistleblower would
have to be an individual who provides high quality, original
information on a voluntary basis leading to the commencement of OSC
administrative proceedings and resulting in an enforcement outcome
(including a settlement) with an order or agreement to pay more
than $1 million (excluding costs) (the
"Threshold"). The proposal prescribes
certain categories of individuals who would not be eligible,
including individuals in compliance roles. Individuals who
participated in the reported activity are not automatically
ineligible; the level of their culpability will be a factor in
determining whether an award is to be made.
Incentive. A financial award of up
to 15% of the total monetary sanctions (excluding cost awards)
could be awarded where the total sanctions or settlement payments
exceed the Threshold. The maximum amount of any award would be
capped at $1.5 million. The determination to make, and the ultimate
amount of, an award would be wholly in the discretion of the
Commission (based upon Staff recommendation), regardless of whether
an individual satisfies the prescribed criteria.
Confidentiality. The OSC
would use all reasonable efforts to keep a whistleblower's
identity confidential, subject to certain exceptions (e.g., when
the relevant information is necessary to make Staff 's case
against a respondent). The OSC is considering whether to adopt a
policy that would allow a whistleblower to remain anonymous and
interact with Staff through legal counsel (at least until the
determination of any financial reward, in order for the OSC to
Protection. To encourage
whistleblowers to come forward and deter employer retaliation,
Staff would have the ability to prosecute a retaliating employer,
whistleblowers would have a civil right of action against a
retaliating employer, and contractual provisions to silence
whistleblowers would be unenforceable.
While Staff is considering establishing the program through the
adoption of an OSC Policy, certain elements of the program (such as
anti-retaliation protection) would require legislative
Considerations Regarding the Proposal
The proposal raises numerous issues, including:
whether the right criteria has been
identified for eligibility,
the potential impact on internal
whether the financial incentives,
which in contrast to the SEC model would be "capped", are
whether the triggers for those
incentives are appropriate, and
whether, and if so to what extent,
anonymity is appropriate.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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