Securities regulators in Ontario and Quebec have recently launched whistleblower programs to encourage people to come forward and report securities-related misconduct. Both programs aim to maintain the confidentiality of the informant's identity and information, and protect him or her from reprisal. However, the two programs differ in that Ontario’s awards monetary compensation for eligible informants, and Quebec’s doesn’t.

Securities regulators in Ontario and Quebec have recently launched whistleblower programs to encourage people to come forward and report securities-related misconduct. Both programs aim to maintain the confidentiality of the informant's identity and information, and protect him or her from reprisal. However, the two programs differ in that Ontario’s awards monetary compensation for eligible informants, and Quebec’s doesn’t.

The Ontario Securities Commission's ("OSC") Whistleblower Program offers a monetary award that can go up to $5M for an individual who meets certain eligibility requirements. These requirements specify that the information must be original in nature in the sense that it is not already known by the OSC. In addition, the information must come from the informant's own knowledge or otherwise through his own critical analysis of publicly available information, if this analysis is not generally known or available to the public.

To be eligible for a whistleblower award, the information provided must be of high quality and provide sufficient timely, specific and credible facts relating to the alleged violation of Ontario securities law.

Combined with original and voluntary disclosure, the sufficient depth and quality of the information must provide meaningful assistance in the subsequent investigation. No whistleblower award will be provided for information that is either found to be based on allegations, made by a third-party or criminal in nature.

Though certain individuals are eligible to collect a financial incentive under the OSC program, businesses and organizations are not. Eligible individuals who present original information may include current or former employees, contractors, suppliers and clients. However, except in limited circumstances, directors, officers, auditors, in-house counsel and other individuals holding a position with reporting and disclosure obligations are generally not eligible to receive a whistleblower award.

To be entitled to receive an award, the information provided must lead to an administrative proceeding for which a minimum of $1M in sanctions are ordered and/or voluntarily paid. An eligible whistleblower will receive an award anywhere between 5 and 15% of the total monetary sanctions imposed and/or voluntary payments made. If the sanctions or voluntary payments exceed $10M, the standard maximum amount that can be awarded is $1.5M. However, if the sanctions and/or voluntary payments exceed $10M and are also collected, then the maximum amount goes up to $5M.

Québec's Whistleblower Program, developed by the Autorité des marchés financiers ("AMF"), focuses primarily on confidentiality and anti-reprisal measures for the informant. In the event that maintaining confidentiality isn’t possible, the AMF can ensure that the informant is not subject to reprisal in the workplace and is immune from civil liability resulting from the information that's been reported.

Although the AMF did consider the financial reward model, it ultimately decided not to include financial incentives as part of its program. According to AMF, informants are primarily driven by confidentiality protections and there is no evidence that financial rewards result in higher quality reporting. The program is similar to those in place in the United Kingdom and Australia where no financial compensation is offered for information that leads to findings of breach of securities law.

Even so, the AMF's decision not to reward whistleblowers is somewhat surprising and has generated its share of criticism, given the success of the U.S. Securities Exchange Commission's whistleblowing program over the last few years. Since August 2011, SEC awards have exceeded $US 54M to 22 informants. The SEC received some 4,000 tips in 2015 alone. It remains to be seen whether a whistleblowing program that offers no financial incentive will have the same success.

There is some controversy surrounding whistleblower programs like those contemplated in Ontario and Quebec. Proponents point to obvious benefits in that they will encourage timely reporting of serious misconduct that could otherwise negatively impact the integrity of the capital markets and harm investors.

On the other hand, critics charge that these programs can interfere with internal corporate governance and therefore impact the ability of organizations to "self-police", ultimately leaving the task of dealing with corporate misconduct to regulators. Employees and others within the organization may be directly incentivized to skip internal reporting to go straight to the regulators with information. Various stakeholders have raised these concerns with respect to the OSC's Whistleblower Program as it merely "encourages" but does not require prior internal reporting of the alleged violation, seemingly rewarding the early whistleblower.