OSC announces launch of whistleblower program
July 14th will mark the date for the launch of a whistleblower program in Canada.
Ontario's securities watchdog will pay up to $5 million for information on insider information about accounting fraud, insider trading and other securities violations.
This is the first in Canada to pay for whistleblower tips and will include protections for those who come forward, including confidentiality and anti-retaliation measures.
This type of program isn't new to anyone reading the news. The US has had their version of this program for many years.
The Securities and Exchange Commission's whistleblower program was 'created by Congress to provide monetary incentives for individuals to come forward and report possible violations of the federal securities laws to the SEC. Under the program eligible whistleblowers are entitled to an award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and related actions brought by other regulatory and law enforcement authorities'.
This whistleblower program also prohibits retaliation by employers against employees who provide them with information about possible securities violations.
And because this program has been in the works for a number of years now in the US, there's a whole host of lawyers scattered around the nation who specialize in this very type of thing - handling these types of whistleblower complaints.
We've seen the US program provide whistleblowers with payouts of many millions of dollars. In fact the biggest so far was back in 2014 at $30 million. And recently the second highest payout was given - $17 million to a company insider.
The OSC originally planned to cap payments to tipsters at $1.5 million, but now the limit has been increased because experts suggested that original was too little to compensate senior executives who risk losing lucrative jobs and being blacklisted from their industries.
Payouts would still be capped at $1.5 million unless the securities regulator is able to collect at least $10 million in sanctions related to the case. In such cases, the whistleblower would receive between 5% and 15% of the sanctions collected, up to a maximum of $5 million.
Now that's not to say that every single tip will provide the tipster with a payout. The SEC has awarded more than $85 million to 32 whistleblowers since the whistleblower program started in 2011. The agency received more than 4,000 tips last year.
So there are your odds.
We believe this makes it even more imperative that companies implement an anonymous third-party ethics reporting program.
To have a new country-wide top level program launching in July is great... for those whistleblowers who were not able to come forward at their companies in the first place because a) there was no place to report anything anonymously, or b) they thought they'd be retaliated against, or c) it's truly a serious securities offence.
The Commission encourages whistleblowers who are employees to report potential violations in the workplace first in accordance with their employer's internal compliance program. However, they recognize there may be extenuating circumstances for the whistleblower that might otherwise impede his or her reporting to an internal reporting program.
So Canadian companies who haven't yet got a program in place, probably best you do so.