Whistleblower programs aimed at encouraging individuals to report securities related misconduct that occurs in Ontario and Quebec have been launched by the Ontario Securities Commission (the OSC) and the Autorité des marchés financiers (AMF) on July 14, 2016 and June 20, 2016, respectively. While the underlying policy rationale of each of the OSC whistleblower program (the OSC Program) and the AMF whistleblower program (the AMF Program) is substantially similar, under the OSC Program whistleblowers who meet certain criteria will be eligible to receive a monetary award for their information whereas the AMF Program will not offer financial awards at all. Both programs provide anti-reprisal and confidentiality protections to whistleblowers. The OSC Program is accompanied by recently adopted amendments to the Securities Act (Ontario) (the OSA) which provide anti-retaliation protections for individuals reporting misconduct.
The OSC Program
The OSC Program was launched following considerable stakeholder consultation in 2015. As of July 14, 2016, the Office of the Whistleblower is open to receive tips, representing the first paid whistleblower program by a securities regulator in Canada, and OSC Policy 15-601 Whistleblower Program is effective. The OSC Program is designed to motivate individuals to report information about serious violations of Ontario securities law. The OSC first published details of the OSC Program in February 2015 under Consultation Paper 15-401 Proposed Framework for an OSC Whistleblower Program and OSC Policy 15-601 was published for comment in October 2015 and expects that the OSC Program will “increase the effectiveness of the OSC’s enforcement efforts by providing access to high quality information about matters such as insider trading, accounting and disclosure violations and registrant misconduct”.
As previously discussed, under the OSC Program, individuals who meet certain eligibility criteria and who voluntarily submit information to the OSC relating to a breach of Ontario securities law may be eligible for a monetary award if it is determined that the information they provided meaningfully aided the OSC in its investigation of the matter and in obtaining an order imposing monetary sanctions and/or the making of a voluntary payment of $1 million or more. An eligible whistleblower may receive a reward between 5% and 15% of the monetary sanctions and/or voluntary payments. The maximum amount of a reward is set at $1.5 million, unless the OSC successfully collects or receives voluntary payments equal to or greater than $10 million. In such cases, and subject to certain conditions, eligible whistleblowers may be entitled to maximum monetary award of up to $5 million. The initial proposal for the OSC Program had contemplated a $1.5 million maximum monetary award but this cap was raised following comments from stakeholders, as it was deemed too low to adequately compensate executives facing retaliation measures following reporting of a violation.
The initial proposal also provided that directors, officers and chief compliance officers (or equivalent positions) who acquired information through internal reporting and compliance mechanisms would be ineligible for financial awards. However, the OSC Program has been expanded to include such individuals, as well as in-house counsel, under certain circumstances. Individuals who participated in misconduct are also eligible to participate in the OSC Program under certain circumstances but will not be granted amnesty, meaning that the OSC could take action against a whistleblower who participated in a violation of Ontario securities law. The degree of culpability would be factored into any potential monetary reward.
The OSC Program also aims to protect whistleblower confidentiality and includes anti-retaliation measures to deter employers from acting against employees. As previously discussed, the OSA was recently amended effective June 28, 2016 to include anti-retaliation protections for employees who report information to the OSC. These new provisions prohibit reprisals against an employee who has reported to his or her employer, the OSC, a recognized self-regulatory organization (a SRO) or a law enforcement agency, an act that the employee believes is contrary to Ontario securities law. In addition, the OSA now includes a provision which effectively voids any provision in an employment agreement which precludes the employee from reporting violations to the OSC, a recognized SRO, or a law enforcement agency, or from cooperating or assisting with an investigation or a proceeding.
The AMF launches its own whistleblower program but will not pay for tips
As noted above, the AMF has also launched its own whistleblower program, with an aim to better protect individuals who report potential securities law violations. Under the AMF Program, whistleblowers will benefit from immunity from potential civil lawsuits as a result of their reporting of wrongdoing. In order to ensure the AMF Program’s effectiveness, the AMF intends to work with the Québec government to amend applicable legislation to include anti-retaliation provisions, similar to the recent amendments to the OSA.
One major difference between the AMF Program and the OSC Program is that the AMF Program will not offer financial incentives to whistleblowers, but rather will rely upon the provision of whistleblower protections as an incentive for individuals to report. As announced in February, the AMF indicated that it had reviewed and analyzed various whistleblower programs implemented by jurisdictions abroad and “concluded that it cannot be established with certainty that financial incentives generate more quality reporting of wrongdoing, and that the key component of any whistleblower program is in fact the protection offered to whistleblowers”.
It remains to be seen whether the OSC Program and the AMF Program, with differing approaches, will reach the level of success achieved by the SEC, whose paid whistleblower program has resulted in more than 10,000 tips since its inception in 2011, and financial rewards upwards of US$85 million.
The OSC Program came into force July 14, 2016 and the AMF Program came into force June 20, 2016. For further information about, or to file a complaint under, the AMF Program, please see the AMF’s Whistleblower Program webpage. For further information about, or to file a complaint under, the OSC Program, please see the OSC’s Office of the Whistleblower and OSC Policy 15-601 Whistleblower Program.