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A recent report in the Globe and Mail indicates that the Ontario Securities Commission is close to finalizing a whistleblower program, which is expected to launch early this summer. The program will encourage whistleblowers with knowledge of securities law violations to bring them to the attention of the OSC. It is expected to provide payments to whistleblowers of 5 to 15 per cent of the total penalties imposed in a case, as long as there is a successful prosecution that leads to penalties of at least $1-million. Payouts will reportedly reach a maximum of $5-million in cases in which the OSC collects penalties exceeding $10-million. The program will be unique in Canada, although a similar program has been operational in the US for a number of years.

Over the past year, Siskinds has been active in providing public comments on the proposed whistleblower program during the consultation period. Our comments can be found here and here. Siskinds was gratified to learn that some of its proposals were adopted by the OSC. In particular, the financial incentive will no longer be capped at $1.5 million, as earlier proposed, but at $5 million, subject to recovery. Further, a prohibition on retaliation against whistleblowers will be introduced in the Ontario Securities Act.

A properly resourced whistleblower program is a necessary and important part of a securities regulatory regime. As described more fully in Siskinds’ submissions to the OSC, whistleblowers that report on their employers’ malfeasance frequently face legal, reputational and financial retaliation. These concerns constitute a substantial barrier to reporting financial crimes and other corporate misconduct. Regulatory measures to protect and compensate whistleblowers for the risks they assume in helping the regulator and investors are therefore necessary.

American experience indicates that whistleblower programs are highly effective. Former US Attorney General Eric Holder has described the impact of the US whistleblower legislation as “nothing short of profound.” The SEC’s Associate Director of Enforcement Steve Cohen has observed that the SEC’s whistleblower reward program has “clearly turbocharged” its enforcement program. We expect that the Canadian experience will be similar, and the whistleblower program will “turbocharge” the OSC’s enforcement activities, to the benefit of all Ontario investors.

Siskinds congratulates the OSC for implementing this very important program.

To learn more about our whistleblower practice, click here.

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