OSC Launches Whistleblower Program

The Ontario Securities Commission (OSC) has launched the Office of the Whistleblower and published OSC Policy 15-601 Whistleblower Program effective July 15, 2016. Together, these initiatives establish a new whistleblowing program that offers financial awards of up to $5 million for tips on possible violations of Ontario securities law that lead to enforcement action.

The OSC program allows whistleblowers to make anonymous reports to the OSC, and new protections have been enacted for whistleblowers that access the program. In particular, the Securities Act has been amended to add anti-reprisal provisions protecting employees who have sought advice about, expressed an intention to or actually provided information about a possible securities violation to the OSC.  In addition, the Act invalidates gag or confidentiality provisions or agreements that would otherwise silence or prevent whistleblowers from participating in an investigation.

The OSC program—the first of its kind in Canada—has been described by Maureen Jensen, Chair and CEO of the OSC, as a “powerful addition” to the OSC’s enforcement arsenal, and a “game-changer” in Canadian securities enforcement. Ms. Jensen may be right if the OSC program is anywhere nearly as successful as the United States’ Securities Exchange Commission (SEC)’s whistleblower program. The SEC’s program has received more than 14,116 tips and paid out more than $67 million in awards to 29 whistleblowers.  However, the OSC program has already been criticized for incentivizing external reporting of securities violations and undermining internal compliance efforts.

Organizations certainly have an interest in encouraging early and internal reporting of possible securities violations. This allows organizations to investigate alleged wrongdoing, take appropriate corrective action in cases of proven wrongdoing, and implement strategies to control the legal and reputational risks. These interests can still be served—despite the OSC’s whistleblower program—through careful advance planning to create a culture of compliance at the organization, and the establishment of a simple and effective internal whistleblowing system that employees and other stakeholders can use when instances of misconduct are noted. While it may not be possible for an organization to compete with the large financial awards offered by the OSC, these simple steps may create and facilitate an early and internal reporting culture that allow organizations to control and manage the legal and reputational risks they face.