The Ontario Securities Commission (OSC) has proposed OSC Policy 15-601 Whistleblower Program (Policy), which is designed to encourage individuals (whistleblowers) to report to the OSC information regarding serious misconduct related to securities or derivatives, with the prospect of receiving monetary awards in certain circumstances (whistleblower awards).
Under the Policy, any whistleblower may submit information regarding serious breaches of Ontario securities law that is not already known to the OSC and that was obtained either from (i) the whistleblower’s independent knowledge derived from his/her experiences, communications and observations or (ii) the whistleblower’s critical analysis of publicly available information (original information). Original information excludes information that is:
- subject to solicitor-client privilege,
- obtained in connection with the provision of legal advice to a client or employer on whose behalf the whistleblower or his/her firm acts or provides services,
- obtained from an allegation made in a judicial, administrative hearing or enforcement matter of a securities-related self-regulatory organization, a government report, hearing, audit or investigation, or news media (unless the whistleblower is the source), or
- in violation of applicable criminal law.
In connection with the submission of original information, the whistleblower is required to sign a declaration acknowledging that it is an offence under certain securities laws to a make a statement to the OSC that is misleading or untrue or does not state a fact that is required to make any statement not misleading, and that the whistleblower may be prosecuted for providing false or untrue information to the OSC. While this provision is intended to discourage improper or spurious submissions by a whistleblower, the requirement for this declaration could have a cooling off effect in terms of the submission of legitimate claims by adding to the angst that a whistleblower might otherwise be experiencing.
A whistleblower may submit information to the OSC anonymously only if the whistleblower is represented by a lawyer who makes the submission on his/her behalf. However, before any whistleblower award will be paid to the whistleblower, the OSC will generally require disclosure of the identity of the whistleblower. The Policy expressly provides that, while the OSC will use reasonable efforts to keep the identity of a whistleblower confidential, the OSC cannot guarantee that a whistleblower’s identity will remain confidential if requested under the Freedom of Information and Personal Protection and Privacy Act (Ontario). While the Policy also provides that the OSC expects that employers who are the subject of a whistleblower report will not retaliate against a whistleblower, there is currently no statutory power for the OSC to enforce this provision of the Policy. Accordingly, the fact that a whistleblower must expend his/her own financial resources to employ a lawyer in order to maintain confidentiality, and the limits on the OSC’s ability to protect whistleblower confidentiality and prevent employer retaliation, could also deter the submission of original information by whistleblowers.
Once a whistleblower submits original information, the Policy allows the OSC to request additional information and assistance from the whistleblower, including:
- explanations to evaluate and use the information provided,
- a description and precise location for documents of which the whistleblower has knowledge but not possession,
- additional information in the whistleblower’s possession,
- testimony at any OSC proceeding, and
- information relating to whether the whistleblower is eligible for a whistleblower award.
The whistleblower is also expected to maintain the confidentiality of the information submitted and the fact that he/she has made a report to the OSC, as well as of any information provided to the whistleblower by the OSC. Any failure to do any of the above may result in a whistleblower being ineligible for a whistleblower award or impact the quantum of any amount that is awarded (as discussed below).
The Policy provides that voluntarily submitted original information that will be eligible for a whistleblower award will relate to a serious violation of Ontario securities laws and will be of high quality (i.e., contain sufficient timely, specific and credible facts of the alleged violation of Ontario securities law) and be of meaningful assistance to the OSC in investigating the matter and outcome. The Policy provides that all of the above criteria generally are expected to be satisfied in order for a whistleblower to be eligible for a whistleblower award.
The Policy also states that whistleblowers generally will be ineligible for a whistleblower award in certain circumstances, including among others:
- those who refused a request of the OSC for additional information,
- those who breached the OSC’s confidentiality requirements,
- those who obtained information in connection with providing legal services or internal audit or external assurance services,
- those who obtained information while conducting an inquiry or investigation,
- directors or officers of the entity that is the subject matter of the whistleblower submission or who had the responsibility of Chief Compliance Officer (CCO),
- those who acquired information from a person who is ineligible for a whistleblower award unless the violation of Ontario securities law involves that person, or
- those who have been convicted of a criminal offence in relation to the subject matter of the whistleblower submission.
However, notwithstanding the foregoing, certain ineligible individuals could be eligible for a whistleblower award if, among other things, the whistleblower has a reasonable belief that the disclosure of the information to the OSC is necessary to prevent the entity from engaging in conduct that is likely to cause injury to the financial interest or property of the entity or investors or at least 120 days have elapsed since the whistleblower submitted the information to the entity’s audit committee, chief legal officer, CCO or the individual’s supervisor.
In addition, the Policy provides that a whistleblower who is complicit in the violation of Ontario securities law may still be eligible for a whistleblower award, although this will be a factor that may decrease the amount of a whistleblower award. Further, there is no immunity from prosecution for a whistleblower who is complicit in a breach of Ontario securities law. Once again, this could have a negative impact on the ability of the Policy to effectively encourage whistleblower submissions, in particular because the Policy provides no guidance as to what may be considered “complicit” behaviour by the OSC.
A whistleblower who submits original information may receive an award of between 5% and 15% of the total monetary sanctions imposed and/or voluntary payments made resulting therefrom in an amount of $1 million or more, provided that the maximum whistleblower award is $1.5 million if the aggregate amount of monetary sanctions and/or voluntary payments is equal to or greater than $10 million. However, if the OSC actually collects monetary sanctions and/or voluntary payments in an amount equal to or greater than $10 million, than the maximum award is increased to $5 million. The OSC has broad discretion and will consider a host of factors that can increase or decrease the percentage of the whistleblower award, including:
- the timeliness of or delays in making the whistleblower submission,
- the significance of the information provided by the whistleblower,
- the level of assistance provided to the OSC,
- the whistleblower’s efforts to remedy the harm,
- any unique hardships experienced by the whistleblower due to his/her submission,
- whether the information was erroneous or incomplete or not organized,
- the degree of the whistleblower’s culpability,
- the ongoing assistance provided by the whistleblower, and
- whether the whistleblower interfered with the OSC investigation or the entity’s internal compliance and reporting systems.
Overall, the Policy seeks to implement a process designed to encourage whistleblowers to submit allegations of breaches of Ontario securities law to the OSC with the possibility of whistleblower awards. However, there are several elements of the Policy which could adversely impact the desire of whistleblowers to make submissions to the OSC. As the Policy has not been finalized, interested persons may submit comments in writing to the OSC by January 12, 2016.