Editorial: OSC creates whistle-blower program

The Ontario Securities Commission (OSC) has just launched a paid whistle-blower program — the first of its kind by a securities regulator in Canada.

A whistle-blower under this program is “an individual, or a group of individuals acting jointly, who voluntarily provide high-quality information that contains timely, specific and credible facts regarding potential misconduct.”

The program will be managed by the OSC’s new Office of the Whistleblower, which has set up a website at www.officeofthewhistleblower.ca, with Kelly Gorman serving as chief of the Office of the Whistleblower. Tips about Ontario securities law violations can be made through this website or by mail.

The OSC says the whistle-blower program furthers its mandate to “provide protection to investors from unfair, improper or fraudulent practices, and to foster fair and efficient capital markets and confidence in the capital markets.”

These tips about possible violations of Ontario securities law would include illegal insider trading, market manipulation, and accounting and disclosure violations.” Note that this new program excludes tips related to criminal or quasi-criminal matters.

Whistle-blowers who report information that leads to an OSC administrative proceeding resulting in monetary sanctions and/or voluntary payments of $1 million or more may be eligible for a financial award of up to $5 million, under guidelines spelled out in the newly published OSC Policy 15-601 Whistleblower Program.

More specifically, the OSC will pay an eligible whistle-blower an award of 5–15% of the total monetary sanctions imposed and/or voluntary payments made in the relevant proceeding or multiple related proceedings.

The OSC cautions it may take “several years or more” after a whistle-blower initially submits a form before there is payment of a reward. At that time, the OSC may disclose that a whistle-blower award has been paid without disclosing the identity of the whistle-blower. The OSC’s decision on whether or not to give a whistle-blower award cannot be appealed.

Tips would not be eligible for a reward if the information was provided in response to a request, inquiry or summons by the OSC or similar authority; subject to solicitor-client privilege; derived from a judicial or administrative setting; or obtained in a way that violates applicable criminal law. Officer, directors and auditors of a company under scrutiny would not be eligible for an award, and neither would an OSC or related employee.

The Office of the Whistleblower is not obligated to use the information provided by a whistle-blower, and is free to use the information provided “for any purpose” that helps it carry out its mandate.

The program incorporates whistle-blower protections, the OSC says, such the choice to report anonymously if represented by a lawyer.

The OSC vows to “make all reasonable efforts to protect the confidentiality” of whistle-blowers, though a whistle-blower must reveal their identity to the OSC to claim their reward.

Furthermore, the OSC emphasizes that anti-reprisal provisions have been added to Ontario’s Securities Act that allow the commission to take “enforcement action against employers who retaliate against whistle-blowers, and rendering as unenforceable contractual provisions designed to silence a whistle-blower.”

The OSC notes these anti-reprisal protections still apply if the information provided to it doesn’t result in enforcement action, or doesn’t meet the criteria for an award.

At the same time, the Office of the Whistleblower expects a whistle-blower to keep confidential any information the office provides to the whistle-blower. The office generally cannot give the whistle-blower any information as to the status of any ongoing investigations, in accordance with existing guidelines for staff disclosure of investigations.

Any potential whistle-blower should be aware that their hitherto publicly unknown identity could someday be revealed through the mechanism of a freedom of information request, based on Ontario’s Freedom of Information and Protection of Privacy Act.

The OSC recommends that such a freedom of information request be denied in whistle-blower cases, but the OSC doesn’t have jurisdiction in these matters, as the final decision about revealing a whistle-blower’s identity would technically lie with Ontario’s Information and Privacy Commissioner, or a relevant court.