On February 3, 2015, the Ontario Securities Commission (the “OSC“) released a staff consultation paper which outlines a proposed framework for an OSC Whistleblower Program. The program seeks to encourage individuals to report serious breaches of Ontario securities law, that would not otherwise come to the OSC’s attention.
As proposed, the program contains the following key features:
- Whistleblower Eligibility – The OSC proposes that the payment of awards be limited to whistleblowers (individuals) who report high quality, original and voluntary information regarding serious misconduct, which leads to the commencement of proceedings under section 127 of the Ontario Securities Act (the “Act“), and which result in an enforcement outcome, or in a settlement, with an order or agreement to pay total monetary sanctions of more than $1,000,000 (excluding costs);
- Financial Incentive – Whistleblowers will receive monetary incentives in exchange for providing timely and robust information. The awards seek to recognize the professional and personal risks undertaken by these whistleblowers. Whistleblowers may generally get up to 15% of the ultimate financial monetary sanction or settlement collected by the OSC as a result of a proceeding, with a proposed maximum award capped at $1.5 million for proceedings whose sanctions exceed $10 million;
- Confidentiality – Central to the program will be the OSC’s efforts to protect the identity of whistleblowers, who generally will not be required to testify. There are, however, exceptions to this rule which should be carefully noted by interested parties;
- Whistleblower Protection – The OSC proposes to also take an active role in addressing retaliation against whistleblowers by creating three (3) new statutory provisions under the Act. These provisions will make it a violation of the Act for employers to retaliate against whistleblowers, provide whistleblowers with a civil right of action for such employer retaliation, and render contracts designed to silence whistleblowers unenforceable under the Act; and
- Program Administration – Finally, the OSC plans to create a separate intake unit within its Enforcement Branch designed to administer the program, and to promote and encourage whistleblowers to come forward with quality information.
The OSC’s initiative comes on the heels of the US Securities and Exchange Commission’s 2011 adoption of a successful whistleblower program, and of the CRA’s launch of its Offshore Tax Informant Program in early 2014. Both these programs have been shown to be effective in addressing violations of their respective governing legislation. The OSC’s Whistleblower Program promises to be the first of its kind amongst provincial securities regulators in Canada.
The OSC is seeking comment from market participants until May 4, 2015. Any changes to the Act are expected to carefully straddle the line between regulating issuers’ transgressions, while at the same time allowing issuers the opportunity to self-correct through internal compliance measures.
We will keep a close eye on this development and encourage participation and comment by interested parties.
* The author wishes to thank Denisa Mertiri, Articling Student, for her assistance with this posting.