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Ontario Securities Commission whistleblower program – 5 years of success

The Ontario Securities Commission has recovered $44 million in sanctions and voluntary payments from enforcement actions because of whistleblowers' information during the first five years that its whistleblower program has been operational. (Photo by Brie79 via Flickr (CC BY-ND 2.0))

The Ontario Securities Commission whistleblower program’s first five years have been a success, with approximately $44 million collected in sanctions and voluntary payments from enforcement actions based on whistleblowers’ information.

The OSC whistleblower program has received a total of 650 reports from whistleblowers across Canada and 15 other countries. The number of annual submissions from whistleblowers has increased each year, according to the OSC. To date, the OSC has awarded more than $8.6 million to whistleblowers.

The OSC, the securities regulator of Canada’s most populous province, modeled its whistleblower program on the highly successful whistleblower program of the US Securities and Exchange Commission, although it differs in key ways. Launched in 2016, the OSC whistleblower program is the only such program in Canada to offer whistleblower rewards.

“The OSC whistleblower program continues to exceed expectations and deliver tangible results,” said Grant Vingoe, Chair and CEO of the OSC. “I want to commend those who have come forward with information related to securities misconduct in Ontario. Their courage and determination enhance our ability to protect investors and achieve better enforcement outcomes for our markets.”

Whistleblower reports to the OSC have included information about the deception of investors and regulators, illegal insider trading, market manipulation, abusive short selling and retaliation against whistleblowers.

The OSC reports receiving detailed information of misconduct involving financial services, natural resources and technology from whistleblower insiders with highly specialized knowledge of the industry, underscoring the importance of whistleblowers in uncovering hidden financial fraud.

The Ontario Securities Commission’s whistleblower program

The OSC’s whistleblower program accepts information about possible violations of Ontario securities law, while offering protections to whistleblowers who come forward and rewards of up to $5 million for reporting that leads to enforcement actions.

OSC whistleblower awards range between 5% – 15% of the amount collected by the Commission as a result of a whistleblower’s information, up to a maximum of $5 million. The actual percentage depends on the value of the whistleblower’s information and assistance on the case.

The OSC encourages whistleblowers to report possible securities law violations internally through their employers’ compliance programs by considering internal reporting efforts a factor in decisions about reward amounts. But the OSC does not require whistleblowers to do so to be eligible for a reward.

Whistleblowers who are to some degree culpable or complicit in securities-related misconduct are eligible for awards. However, culpability may decrease the reward amount.

Whistleblowers may report to the OSC anonymously by doing so through a lawyer, and some have done so. Their identity must be revealed to the OSC, however, to claim a whistleblower reward.

Canadian law protects whistleblowers from retaliation. Under the Ontario Securities Act and Commodities Futures Act, the OSC can take enforcement action against companies that retaliate against whistleblowers, including threatening, demoting, terminating, harassing or otherwise disciplining reporting whistleblowers. Whistleblowers are eligible for protection even if they do not qualify for an award.

“These individuals take tremendous personal and professional risks in coming forward, and the protection of whistleblowers is, therefore, a critical component of our program,” said Jeff Kehoe, Director of Enforcement at the OSC.

In 2020, the OSC took its first enforcement action related to a retaliation against a whistleblower. Cryptocurrency market Coinsquare as well as two chief executives settled charges that they misled investors with inflated trading volumes and retaliated against a whistleblower who reported the alleged misconduct. Three executives relinquished their positions at Coinsquare and paid penalties as part of their settlement.

Differences between the US SEC and OSC whistleblower programs

Awards are a driving element of the success of both the OSC whistleblower program and the SEC whistleblower program.

The SEC whistleblower program, however, offers larger awards. The SEC rewards securities whistleblowers with 10% to 30% percent of the amount collected as a result of whistleblowers’ information, if SEC sanctions exceed $1 million. There is no maximum limit on the dollar amount.

Other aspects of the two programs are similar, offering strictly guarded confidentiality and comprehensive protection from retaliation.

The SEC whistleblower program was created by the Dodd-Frank Act in 2010.

With its national and sometimes global reach, the SEC has received many more whistleblower submissions than the OSC program. In FY 2020 alone, the SEC received over 6,900 whistleblower submissions, which is more than 10 times what the OSC received in five years. The SEC has ordered more than $3.1 billion in enforcement sanctions as a result of information and assistance provided by whistleblowers.

The SEC has awarded approximately $942 million to 186 individuals since issuing its first award in 2012. The SEC issued $57 million in rewards to whistleblowers in May 2021 alone, eclipsing in a single month the OSC’s historic total.

The law offers SEC whistleblowers strong confidentiality safeguards along with protection from job retaliation and rewards.

The money for SEC whistleblower rewards comes from a special fund supported through monetary sanctions paid to the SEC by securities law violators.

If you are aware of possible securities law violations and are thinking of becoming a whistleblower, contact us for a free, confidential review of your matter by experienced and successful SEC whistleblower attorneys.

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