OSC whistleblower program to offer rewards of up to $1.5M for info

Ontario's securities regulator plans to create a reward program that would pay whistleblowers up to $1.5 million for anonymous information that leads to prosecutions for major financial crimes.

The Ontario Securities Commission said Tuesday it wants to set up a fund to pay people to provide it with crucial evidence of financial misdeeds that would otherwise be difficult if not impossible to obtain.

"Under the program, a whistleblower could be awarded a financial incentive of up to $1.5 million upon the final resolution of an administrative enforcement matter," the regulator said in a release.

No other securities regulator in Canada has a similar program that pays people for information. But under Dodd-Frank legislation designed at overhauling America's financial system first implemented in 2011, the U.S. Securities and Exchange Commission started a similar program to solicit tips. 

Similar U.S. program paid $30M to 1 tipster

The SEC program offers rewards of between 10 and 30 per cent of the monies awarded for any crime with more than $1 million in fines. The agency has been flooded with more than 10,000 tips since that time, resulting in nine major payouts last year alone, including one tipster who was given $30 million in September of 2014 for a role in a major financial prosecution.

America's tax agency the IRS recently paid out $104 million to a tipster who helped tax authorities get information on millions of dollars being held in Swiss bank accounts, even after the tipster himself spent 2.5 years in jail for his role in the scam.

And last year, the Canada Revenue Agency implemented a similar system that could see people paid between five and 15 per cent of what's recovered for providing Canada's tax man with information on other people cheating on their taxes.

"We see a whistleblowing program as an important enforcement tool," OSC chair Howard Wetston said in a release, "one that will encourage individuals with high quality information to come forward and report misconduct."

But the regulator isn't going to be simply cutting a blank cheque anytime soon. In a consultation paper, the regulator suggests a tipster could receive "up to 15 per cent" of the monetary penalties uncovered from any major case, which the OSC defines as one in which more than $1 million worth of fines would be levied.

That implies the reward could begin at about $150,000, but could go as high as $1.5 million if the penalties of any guilty parties are deemed to be higher than that.

The regulator says it also wants to strengthen the province's laws to further encourage people with information to come forward by making sure their anonymity will be maintained and beefing up anti-retaliation provisions.

The OSC is the regulator in charge of overseeing the securities industry in Ontario. As a result, any TSX-listed company, and any company that does business in Ontario, is subject to its jurisdiction.