Whistleblower Wins Big: Lessons From Canada's First Civil Retaliation Claim Grounded In Securities Law

How do you discipline an employee who reports alleged breaches of securities law? Not easily, according to McPherson v. Global Growth Assets Inc., which is the first judicial decision to consider the scope of the anti-reprisal provisions in the Securities Act.¹ We have previously written about the civil cause of action for reprisal. McPherson provides guidance on the breadth of the reprisal provisions, which has civil and regulatory implications.

Background

The plaintiff, Ian McPherson, alleged that his employment with a registered investment fund manager ("Global") was terminated because he expressed concerns regarding violations of securities laws. He sought elevated damages under the anti-reprisal provisions in the Ontario Securities Act.

Briefly, Mr. McPherson was concerned that the firm's former CEO was seeking to interfere with the firm's operations through the increased involvement of his daughter, even though he was prohibited from doing so by a prior order from the Ontario Securities Commission ("OSC"). Global and its former CEO had a lengthy history with the OSC. McPherson reported his concerns to Global's independent directors on four occasions. Each time, he was stonewalled. He was subsequently terminated without cause and without explanation.

The whistleblower protection framework in securities law

The OSC expects that employers will not discipline, demote, terminate, harass, or otherwise retaliate against a whistleblower who has made a report either "up the ladder" internally or directly to regulators. The OSC also expects employers not to take action, through contractual agreement (including confidentiality agreements) or otherwise, to impede a whistleblower from making a report to regulators.

The Securities Act has a civil cause of action in s. 121.5(1) for whistleblowers who experience reprisal. In particular:

• The whistleblower may bring an action in the Superior Court of Justice or make a complaint to be resolved by binding arbitration.
• The employer bears the "burden of proof" to demonstrate that it did not engage in a reprisal against the employee, meaning any measure that adversely affects their employment.
• The court (or arbitrator) may order: (a) the employee's reinstatement to the same seniority status that the employee would have had, but for the contravention; and/or (b) two times the employee's remuneration (payments, benefits and allowances) from the time of the contravention to the date of the order, with interest.

The Court's guidance on whistleblower provisions

As the first civil decision to interpret the scope of the whistleblower provisions in the Securities Act, McPherson provides several significant findings regarding s. 121.5(1).

First, the Court clarified that s. 121.5(1) will be violated if "any part" of the motivation for reprisal was the fact that the employee engaged in protected activity.²

Second, s. 121.5(1) protects employees if they have a "reasonable belief" that there was a breach of securities law. The Court held that this simply means a "subjective belief" that is "objectively reasonable" in light of the information available to the employee at the time.³ In other words, a relatively low bar.

Third, the Court rejected the argument that Mr. McPherson had the initial burden to show that he engaged in protected activity and suffered a reprisal, an approach taken in some parts of the U.S. with similar legislation.⁴ Instead, the burden of proof rests with a defendant to establish that they did not breach s. 121.5(1).⁵

Fourth, a whistleblower has no duty to mitigate damages when pursuing a claim under s. 121.5(1). As a result, damages awarded under the statutory claim will not deduct for any post-termination earnings.

Mr. McPherson was reprised and entitled to damages

The Court had little difficulty finding that reprisals had been taken against Mr. McPherson, contrary to s. 121.5(1) of the Securities Act. Mr. McPherson had a reasonable belief that Global and its board members engaged in acts that interfered with his ability to discharge his responsibilities. Mr. McPherson's reporting of his concerns was "the predominant reason" for his termination.

Mr. McPherson was awarded damages, measured as twice the amount of remuneration that he would have received between the date he was terminated and the date of the judgment. This sum was $5,379,808.22, plus interest. Mr. McPherson had no duty to mitigate damages or account for the salary he earned in other employment in the interim.

Takeaways

1. McPherson adopts a very broad interpretation of the civil cause of action for whistleblower retaliation. Even when an entirely justified motivation predominates an employer's decision (e.g., sub-par performance), that decision could be suspect when informed by an improper consideration of the employee's protected activity. As the Court explained:
   • It does not matter that a company might have valid reasons for terminating employment, such as concerns about performance, they will have engaged in an unlawful reprisal contrary to s. 121.5 if part of the motivation for termination was the fact that the employee asserted protected rights.⁶
2. A whistleblower is protected when their belief is objectively reasonable based on "information available" to them. However, this creates challenges when an employee erroneously, but genuinely, reports alleged securities law violations based on incomplete information. Can such an employee be terminated without cause? The Court's dicta appears to not completely insulate a whistleblower:
   • ... [T]he purpose of the protection from reprisal provisions is to permit employees to raise and attempt to raise concerns about potential breaches of Ontario securities law without fear of adverse impacts on their employment. The underlying idea is to encourage employees to report possible violations of the Act by providing them with a measure of immunity against employer retaliation.⁷
3. It is important for employers to follow a well-defined and documented process when disciplining an employee who is known to be a whistleblower. The contemporaneous record should establish that any discipline imposed on a whistleblower is not directly or indirectly connected to the whistleblower's reporting of potential misconduct. In McPherson, while Global's directors testified that Mr. McPherson was terminated for performance-related reasons, the contemporaneous record did not support their position on the timing or justification for the termination.
4. An employer can take adverse steps against a whistleblower that will not necessarily amount to reprisal under securities law. In McPherson, the company commenced a $53.5M counterclaim against Mr. McPherson for alleged slander and seeking to harm its economic interests. Even though the counterclaim was struck and found to have been "brought in bad faith", the Court found that it was not a reprisal under securities law because the counterclaim post-dated the termination.
5. Registrants must strategically consider the civil and regulatory implications of reprisal allegations. While Mr. McPherson's civil dispute against Global and its directors went to a civil trial without a parallel enforcement proceeding by the OSC, it still possible that such a proceeding may be commenced. The Court's factual findings arguably also ground breaches of securities law against Global and its independent directors.

Footnotes

1. McPherson v. Global Growth Assets Inc., 2025 ONSC 5226.

2. McPherson v. Global Growth Assets Inc., 2025 ONSC 5226 at para. 108.

3. McPherson v. Global Growth Assets Inc., 2025 ONSC 5226 at para. 114.

4. McPherson v. Global Growth Assets Inc., 2025 ONSC 5226 at para. 117.

5. McPherson v. Global Growth Assets Inc., 2025 ONSC 5226 at para. 123.

6. McPherson v. Global Growth Assets Inc., 2025 ONSC 5226 at para. 410 [emphasis added].

7. McPherson v. Global Growth Assets Inc., 2025 ONSC 5226 at para. 76 [emphasis added].

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