Corporate whistleblower program to pay up to $5M for tips
Ontario Securities Commission warns culpable tipsters will not be immune from prosecution.

TheStar.com
July 14, 2016
Lisa Wright

Canada’s first paid whistleblower program aimed at cracking down on corporate misconduct will pay rewards of up to $5 million for information leading to prosecution — even to tipsters involved in the actual wrongdoing.

“Our program also allows individuals who have been involved in the misconduct to be eligible for an award,” said Kelly Gorman, chief of the new Office of the Whistleblower at the Ontario Securities Commission.

“The simple truth is that culpable individuals often have detailed knowledge of the misconduct which will allow us to quickly identify and put a stop to ongoing harm,” she told a new conference Thursday at the official launch.

However, culpable tipsters will not be immune from prosecution, and the potential payout may decrease depending on the degree to which the person or group is complicit in the misconduct being reported, said Gorman.

Ontario’s securities watchdog set up the program in an effort to root out accounting fraud, insider trading and market manipulation, said the OSC’s chief executive Maureen Jensen.

“Our whistleblower program is a powerful addition to our enforcement arsenal and a game-changer for securities enforcement in Canada,” she said.

Whistleblowers can include any individual or group who are aware of or suspect a violation of Ontario Securities law including employees, former employees, suppliers, contractors, clients and others, says the newly published policy.

“Information must be original, voluntarily submitted, of high quality and of meaningful assistance to staff in investigating the matter and obtaining an award-eligible outcome,” it states.

“These cases are very complex and have sophisticated players, and it’s very hard to detect them without whistleblowers,” Gorman said, noting she believes the “vast majority” of publicly-traded businesses in Ontario are currently operating above board.

The program also includes protections for those who come forward, such as confidentiality and anti-retaliation measures from employers.

Individuals can also report anonymously through a lawyer and can remain anonymous throughout the investigation and enforcement process, and are required to give identifying information to the OSC only when it comes time for payment, according to the new policy.

If whistleblowers have already reported the issue internally and nothing comes of it, they have to wait at least 120 days before tipping off the securities commission.

“Our program provides significant incentives for whistleblowers to come forward and offers robust protections,” Gorman noted, adding: “It is time to change the stigma of whistle-blowing. Whistleblowers play an essential role in exposing misconduct.”

Contractual provisions designed to silence a whistleblower at work are unenforceable under new provisions added to the province’s securities legislation.

But Jensen told reporters that the OSC does not have the authority to reinstate employees who have been fired as a result of giving the information. However, the OSC can fine companies who do so after a hearing, she said.

Toronto employment lawyer Howard Levitt said that while the concept is “wonderful,” since it is modelled on a successful program run by the Securities and Exchange Commission in the U.S., he fears employees are taking great risk spilling company secrets, including termination and lawsuits.

“Don’t think that this legislation means it’s open season to tattletale on your employer,” he warned.

Gorman said whistleblowers are not immune to their own prosecution if the information they provide was obtained illegally, such as stealing corporate files and documents.

Businesses and organizations where the alleged misconduct has taken place cannot be whistleblowers, she said. Others who are ineligible include directors or officers of the company, chief compliance officers, in-house counsel, auditors and those who obtained the information while conducting an inquiry or investigation.

She explained that they are already legally required to take internal action in the case of any impropriety to protect investors.

Payouts are capped at $1.5 million unless the securities regulator is able to collect at least $10 million in sanctions related to a case.

In successful cases, the whistleblower would receive between five and 15 per cent of the sanctions collected, up to a maximum of $5 million.

Tipsters do not see a dime of the money though until cases have wound their way through the courts and all appeals have been exhausted, which often takes several years, Levitt said.

Quebec tabled whistleblower legislation last year designed to protect public sector workers but does not offer monetary rewards or incentives.

The SEC’s whistleblower program has awarded more than $85 million U.S. to 32 whistleblowers since the program’s inception in 2011. Their awards can range from 10 per cent to 30 per cent of the money collected when the monetary sanctions exceed $1 million.

The Ontario whistle blower’s office has six staff and a dedicated website that is now open for tips at www.officeofthewhistleblower.ca or submit information to the OSC by mail.