Canada: Issuers Apprehensive Of OSC's Proposed Whistleblower Program

The public comments on the Ontario Securities Commission (OSC)'s proposed whistleblower program (Program) evidence considerable concern that the Program could undermine issuers' internal reporting and compliance programs, create conflicting duties and incentives for employees, and prevent issuers from disciplining employees for wrongdoing.

While the comment letters from issuers, law firms, industry associations, academics and investor advocates were in large part supportive of the goals of the Program, many identified causes for concern as to specific aspects of the Program as outlined in OSC Staff Consultation Paper 15-401 – Proposed Framework for an OSC Whistleblower Program (Consultation Paper). In addition to the items noted above, commenters also flagged the size and structure of the proposed financial incentive, the Program's proposed funding structure, the perceived lack of clarity of the types of behaviour to be targeted by the Program and the eligibility for rewards of an organization's chief compliance officer (CCO), directors and officers as potentially troubling.

The proposal has five major components: a financial incentive, eligibility criteria for whistleblowers, confidentiality for whistleblowers, protection of whistleblowers and program administration. For a more detailed summary of the proposal, please see our April 2015 Blakes Bulletin: Whistleblowers to Be Rewarded, Protected Under OSC Proposal.


Many commenters, including issuers, industry associations and law firms, expressed concern that because the Program would not require whistleblowers to report wrongdoing through internal compliance processes before providing information to the OSC, it would undermine internal reporting and compliance procedures.

In particular, commenters worried that the financial incentive could tempt employees to bypass a company's internal compliance mechanisms and instead report violations directly to the OSC. Many commenters expressed concern that this could prevent issuers' internal compliance systems from functioning properly.

Although commenters acknowledged that the OSC's proposal included provisions intended to encourage use of internal compliance processes (for example, by considering the date of internal reporting as the report date for the purposes of eligibility for the Program), many commenters indicated that they considered it appropriate for the OSC to require potential whistleblowers to have reported through internal compliance programs before providing information to the OSC under the Program. Some pointed to the U.S. Securities and Exchange Commission (SEC)'s whistleblower program, which requires that a period of time pass following internal reporting before a whistleblower can provide information to the SEC, as an appropriate model.

Some investor-advocacy groups, however, expressed the view that internal reporting should not be required for eligibility under the Program.


Commenters warned that the financial incentive under the Program might lead employees to take actions that were in conflict with their duties to their employers — for example, by breaching obligations of confidentiality or their duties to use internal reporting mechanisms.

Issuers and other commenters also cautioned that the possibility that a financial award under the Program might incentivize potential whistleblowers to engage in further misconduct or to delay reporting misconduct to ensure that, once reported, the misconduct would be sufficiently serious to meet the Program's criteria. The financial incentive might in this way exacerbate rather than deter the type of misconduct targeted by the Program.

Issuers generally called for greater exclusions relating to culpable conduct and expressed opposition to permitting those who engaged in the misconduct to profit from it as a result of the Program. Some law firms suggested that providing immunity or leniency to culpable whistleblowers would be more appropriate than making a financial award.

Supporters of this aspect of the OSC proposal contended those engaged in misconduct should not be excluded from eligibility because such participants would often be best placed to provide reliable information about the misconduct and therefore would be some of the most valuable whistleblowers.


Issuers and industry groups also generally warned that the Program's anti-retaliation provisions might prevent issuers from appropriately disciplining employees who engaged in misconduct or did not comply with internal policies. Commenters worried that, faced with the knowledge that an employee had engaged in misconduct, issuers would be hamstrung in dealing with such an employee by the anti-retaliation provisions.

A further concern raised about the proposed anti-retaliation provisions focused on the OSC's lack of expertise in enforcing such provisions. The enforcement of any anti-retaliation provisions, it was suggested, should be left to a court or specialized tribunal rather than the OSC.

Certain investor groups, on the other hand, advocated strengthening the anti-retaliation provisions by, for example, specifying that whistleblowers who chose to use internal reporting mechanisms would also benefit from the Program's anti-retaliation provisions.


The Prospectors and Developers Association of Canada (PDAC)'s comment letter was notable for its outright opposition to the provision of a financial incentive. PDAC argued that the financial incentive model was inappropriate in the Canadian context given the relatively small size and fragmented regulatory framework of the country's capital markets. As discussed above, many commenters also raised concerns about the potential negative effects that providing a financial incentive could have on companies' internal compliance systems.

On the other hand, a number of commenters, including investor advocacy groups, academics and investors' law firms, submitted that, given the reputational and economic risk involved in whistleblowing, the C$1.5 million cap on awards was too low to provide a sufficient incentive for whistleblowers to share information with the OSC.

To address this perceived deficiency, some commenters suggested that an eligible whistleblower should be able to receive a percentage of any amount collected by the OSC in addition to a capped award to be paid regardless of the amount recovered.


Certain industry groups expressed concern about the OSC's proposed method of funding the Program. These groups commented that, if the financial incentives were not dependent on the recovery of monetary sanctions, the cost of the Program might be borne by all market participants — through, for example, higher participation fees — rather than by wrongdoers.


A number of commenters indicated that, in their view, the OSC's proposal did not sufficiently identify the types of behaviour that the Program was intended to target and encouraged the OSC to more specifically define the types of serious misconduct the Program aims to uncover and prevent.


The OSC's proposal contemplated excluding an organization's CCO and any director or officer who learned of misconduct as a result of the organization's internal reporting or investigation process from eligibility for a financial award under the Program, and the OSC specifically asked for comments on whether an organization's CCO should be excluded from eligibility.

Commentary on this question generally acknowledged that a CCO should, in practice, nearly never be eligible, but was divided on whether the Program should allow a CCO to be eligible in certain exceptional circumstances.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions