Ontario market watchdog pays $7.5 million to three whistleblowers in Canada’s first reward for tips

The Ontario Securities Commission has paid $7.5 million to whistleblowers in the inaugural use of a first-of-its-kind program in Canada that pays for tips leading to findings of wrongdoing under securities law.

The three recipients receiving the cash were not identified by the OSC, which pledges to take “all reasonable efforts” to protect the identity of whistleblowers.

“These individuals voluntarily provided high quality, timely, specific and credible information, which helped advance enforcement actions resulting in monetary payments to the OSC,” the OSC Office of the Whistleblower said in a statement. “These whistleblower awards are the first ever by a Canadian securities regulator.”

Maureen Jensen, chair of the regulator, said the program “has proven to be a game-changer for the OSC’s enforcement effort,” and praised those who came forward and providing “valuable information about harm to Ontario’s capital markets.”

The OSC’s program was launched in 2016 in hopes of matching the success of a similar program run by the U.S. Securities and Exchange Commission. Under the Canadian program, whistleblowers can receive compensation of up to $5 million for a tip that leads to enforcement action.

The SEC rewards tips that lead to sanctions of at least $1 million and — in a richer formula than the one used by the OSC — pays up to 30 per cent of money collected to the whistleblower. The U.S. regulator paid a record-breaking award of $83-million to a trio of recipients last March.

The SEC releases more details about whistleblower awards, such as aggregate sanctions the U.S. regulator has imposed on the wrongdoers.

Kristen Rose, the OSC’s manager of public affairs, said releasing specifics could compromise the Canadian watchdog’s effort to protect the identity of those providing valuable information.

“In a capital market the size of Ontario’s, there is heightened risk that any details we provide could identify the whistleblowers,” she said.

Jordan A. Thomas, a partner at law firm Labaton Sucharow in New York who advises whistleblowers in the United States, said providing additional details does not “on balance” add value to such programs.

“The more information the SEC (or) OSC provide to the public, the more risk that whistleblowers will face,” he said, adding that protection from retaliation inspires more reporting.

Jeff Kehoe, director of enforcement at the OSC, said he hopes the first awards granted by the Canadian regulator, and the confidentiality protection offered, will encourage more whistleblowers to come forward.

“Whistleblowers expose complex securities misconduct that may not otherwise come to light, allowing us to take timely action,” Kehoe said in a statement.

In a June 2018 update, the OSC said its whistleblower program had generated about 200 tips, an average of two tips per week. About 10 per cent of those tips were referred to the enforcement unit for further action, often resulting in investigations.

At that time, there had been with no awards yet granted under the OSC’s two-year-old program, and the Canadian regulator said that process could take years because a payment could not be made until all rights to appeal a finding made by the market watchdog had been exhausted or expired.

Securities regulators in other Canadian provinces have whistleblower programs, but only the OSC has opted to compensate people who voluntarily bring forward information of suspected wrongdoing.

The OSC adopted its paid whistleblower program after consulting with industry and investor groups, and reviewing the SEC’s established program.

The SEC paid the first whistleblower award in 2012, and since then has paid 59 whistleblowers a total of more than $326 million.

Last year alone, $168 million was paid by the SEC to 13 individuals, “each of whom voluntarily provided original information that either led to the opening of an investigation or significantly contributed to a successful enforcement action,” according to the SEC’s Office of the Whistleblower.

The program’s latest annual report to Congress in November indicated that information provided by whistleblowers led to more than $1.7 billion in monetary sanctions being meted out by the regulator, $452 million of which was to be returned to harmed investors.

Whistleblowers have been described by the SEC as being “among the most powerful” weapons at the regulator’s disposal, because they can help identify violations such as fraud much earlier than would otherwise be possible.

Contenu similaire