On November 7, the British Columbia Securities Commission (BCSC) launched a Whistleblower Program offering monetary awards to qualified individuals who provide information about securities law violations.
“Often, people who break the law in the investment market or evade our sanctions can’t do it without others noticing,” BCSC chair Brenda Leong told the Vancouver Sun. “The BCSC always encourages people to report suspicious activity, and we think these awards provide an added incentive for people to contact us and provide information that will help make our market more honest and fair.”
Under the program’s rules, “a whistleblower is someone who provides information to the BCSC that meaningfully contributes to an investigation of investment fraud and other serious types of market misconduct.”
Whistleblowers can qualify for awards ranging from $1,000 to $250,000 CAD. The BCSB will weigh a number of factors in determining how much to award a whistleblower, including the speed of reporting, the seriousness of the misconduct, and the level of cooperation provided by the whistleblower after reporting.
These whistleblower award protocols diverge from the best practices supported by whistleblower advocates who argue that caps undermine the efficacy of whistleblower programs and that awards should be directly tied to the amount of sanctions collected. Advocates also claim that awards need to be mandatory to be effective.
For example, the U.S. Securities and Exchange Commission (SEC) offers mandatory awards to qualified whistleblowers which are for 15-30% of the sanctions collected by the SEC in the enforcement action aided by the whistleblower’s disclosure.
Because the SEC’s whistleblower provisions are transnational, securities whistleblowers in British Columbia may be able to report to the SEC instead of the BCSC if the misconduct violates U.S. securities laws and is at a company publicly traded in the U.S. Since it was established in 2010, the SEC Whistleblower Program has received approximately 700 whistleblower tips from Canadian whistleblowers.
According to the BCSC, their whistleblower program differs from the SEC’s in a way that suits the type of misconduct the agency more typically oversees. Leong notes to the Vancouver Sun that whistleblower programs like the SEC’s “pay very rarely. But when they pay, they pay big — we are talking in the millions.”
“When we look at the British Columbia situation, the types of cases that we would typically see in our enforcement portfolio are of a different nature,” Leong notes. “Our cases will involve smaller entities, and one or several individuals, as compared to our counterparts.”
In addition to monetary awards, the BCSC Whistleblower Program offers anonymous reporting channels and anti-retaliation protections to whistleblowers. The B.C. Securities Act prohibits companies from retaliating against whistleblowers.
The BCSC joins the Ontario Securities Commission (OSC) as Canadian provinces with corporate whistleblower award programs. The OSC Whistleblower Program was established in 2016 and offers mandatory whistleblower awards of 5-15% of the sanctions collected in the relevant enforcement action. Awards are capped at $5 million.
In March, the OSC provided an update on their whistleblower program, noting that it has resulted in approximately $48 million in monetary sanctions.
“The OSC created the Whistleblower Program to identify complex or hard-to-detect securities violations. It has proven to be a resounding success,” said OSC Director of Enforcement Jeff Kehoe. “Our review affirms that the Program is a powerful enforcement tool which incentivizes whistleblowers to come forward and protects them from retaliation. This is clearly evidenced by our numerous investigations involving whistleblower tips. Our work on this update exhibits our commitment to fortifying this essential program and we look forward to collaborating with stakeholders to identify more ways to enhance it.”
Further Reading:
BCSC offering money for qualified tips through new whistleblower program