by Greg Klein | July 14, 2016
There’s nothing like altruism, especially when there’s something in it for you. The Ontario Securities Commission became Canada’s first such regulator to open a paid whistleblower program on July 14. The new office wants to hear about possible violations that include illegal insider trading, market manipulation, accounting transgressions and disclosure contraventions. Informers with info leading to OSC sanctions and/or voluntary payments of at least $1 million qualify for rewards ranging from 5% to 15%, capped at $1.5 million. But should the OSC collect over $10 million, the cap rises to $5 million.
The size of the reward depends on the amount collected, a departure from the OSC’s original proposal to pay out even if the malefactor doesn’t.
Those involved in wrongdoing might qualify for a reward, although the degree of culpability can decrease the payout.
Whistleblowers may report anonymously if they have a lawyer act as go-between. The OSC says it “will make all reasonable efforts” to protect their sources. Anti-reprisal provisions apply, even if the info doesn’t bring about enforcement or doesn’t meet the reward criteria. Conditions require that the info isn’t already known to the OSC, was provided voluntarily and didn’t originate from a third party.
Interestingly, there’s no whistleblower reward for info relating to criminal or quasi-criminal cases.
The program’s “a game-changer for securities enforcement in Canada,” said OSC CEO/chairperson Maureen Jensen. The commission studied the Canada Revenue Agency’s Offshore Tax Informant Program and programs implemented by the U.S. Securities and Exchange Commission and the Australian Securities and Investments Commission.
But the latter agency doesn’t offer rewards, the Prospectors and Developers Association of Canada pointed out. Nor does a program run by the U.K. Financial Conduct Authority.
In its submission to the OSC last year, PDAC suggested cash rewards could encourage “bounty hunting behaviour and framing companies for financial gains.” The organization feared companies could face higher compliance costs for additional legal advice.
“Reporting of fraud should be a moral obligation … not driven by financial incentives,” PDAC added.
Nor will payouts come from Quebec’s whistleblower program, launched last month. L’Autorité des marchés financiers found “it cannot be established with certainty, based on specific data, that a financial incentive generates more quality whistleblowing.
“Instead, the AMF’s research and analysis highlight that the protection of confidentiality is what primarily motivates whistleblowers to report incidents.”