The B.C. legislature building in Victoria on Sept. 25. CHAD HIPOLITO/The Canadian Press
Blowing the whistle on companies in British Columbia that are breaking the law now comes with a cash reward. Radiator Hose
Starting Tuesday, the British Columbia Securities Commission will be accepting whistle-blower tips through a new online portal in hopes of encouraging more people to report suspicious activities. Unlike other whistle-blower programs that only pay for tips that lead to large financial penalties, the BCSC is promising cash for information that leads to a variety of different outcomes.
“We hope that this kind of program will incentivize people to come forward early and often,” Brenda Leong, chair and chief executive officer of the BCSC, said in an interview. “It will enable payments to be made to whistle-blowers much sooner than those other paid programs.”
Awards under the program will range from $1,000 up to $250,000, though individual whistle-blowers can potentially receive multiple payments for the same information up to a maximum of $500,000. Tips that lead to initial steps of an investigation, such as a halt trade order on a company’s shares, will be paid at the lower end of that range with payments rising as an investigation progresses along the enforcement process.
B.C. is the second jurisdiction in Canada to institute a paid whistle-blower program. Ontario launched the first such program in 2016 and it has thus far resulted in 19 successful prosecutions, generated a combined $48-million in fines and paid whistle-blowers a total of $9.33-million, according to the Ontario Securities Commission.
The Securities and Exchange Commission in the United States was the first North American regulator to start paying whistle-blowers in 2010, although the SEC and OSC both issue rewards only after an enforcement process is complete and related fines have been paid. That, Ms. Leong said, “can take years.”
The Ontario program was initially designed to cap payments at $1.5-million, but that was eventually raised to $5-million after experts suggested the initial limit was too little to compensate senior executives who run the risk of losing high-paying jobs and being blacklisted from their industries if they reveal information.
Despite payments in the B.C. program being capped at just one-10th of what whistle-blowers could potentially receive in Ontario, Ms. Leong said the West Coast system was devised to suit the specific needs of the B.C. market, where securities law violations are generally perpetrated by small companies or even individuals.
“As compared to the OSC, for example, a lot of their cases involve larger firms and higher financial penalties and, importantly, involve entities that, once sanctioned, are likely to pay because they are active market participants,” Ms. Leong said.
The $2-million settlement that the OSC reached with Royal Bank of Canada last week over accounting violations is a good example “because I’m betting RBC is going to pay that,” she said.
In fact, according to the terms of that settlement agreement, RBC was obliged to pay the fine via wire transfer before the deal was formally approved by the OSC’s Capital Markets Tribunal.
“The kinds of players that we will often go after, they are not able to pay in many cases,” Ms. Leong said. “In a fraud, for example, or a misrepresentation case, they have often already spent the money. The money is spent and it is gone.
“In cases where they may have assets they tend to hide them, and while we have been stepping up our efforts to go after that money to the extent that they are able, it is very difficult because these entities are often not active in the market, they are a one-shot deal oftentimes,” she said.
The amount individual whistle-blowers receive under the B.C. program will be determined on a case-by-case basis, with the regulator’s executive director making the final decision based on a recommendation from staff. Money has already been set aside in the BCSC budget to start paying whistle-blowers, Ms. Leong said, though she declined to say how much.
“The basic principle is that the more helpful the information is, the more we will pay,” Mark Hilford, the BCSC’s deputy director of enforcement and head of the new whistle-blower program, said in an interview. “We have a sophisticated internal process to guide us in making sure that we come up with the right number.”
The vast majority of investigations the BCSC conducts already come from tips, Ms. Leong said.
“People are already coming forward today,” she said. “I think having a monetary award associated with it now will hopefully incentivize people to continue to come forward, but with more credible and timely information.”
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