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The Ontario Securities Commission has paid three whistle-blowers a total of $7.5-million, marking the first payments of their kind in Canada.

The payments, made in three separate cases, were given to people who, the OSC said, “voluntarily provided high quality, timely, specific and credible information” that helped the regulators with enforcement actions. The OSC opened its whistle-blower office in 2016, promising payouts of up to $5-million for people who report securities-related crimes that lead to successful prosecutions.

The OSC did not say which enforcement actions led to the awards, citing the desire to protect the identities of the whistle-blowers. It also didn’t say how much money went to each recipient.

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By setting up the office, the OSC hoped it would compel more companies to act on internal complaints and report wrongdoing to regulators before their employees become whistle-blowers. The OSC said it would accept tips from anyone about securities law violations, including employees, suppliers, contractors or others who have “timely, specific and credible facts” that are provided voluntarily and were not previously known to the regulator.

In developing and administering its program, the OSC was able to look south to the U.S. Securities and Exchange Commission, which set up an Office of the Whistleblower in 2011 to comply with the Dodd-Frank Act. The SEC has awarded more than US$326-million to 59 people since the beginning of its whistle-blower program, including more than US$168-million in the year ended last September. That included a US$83-million award shared by three people and an award of almost US$54-million shared by two individuals.

The SEC also does not identify the specific enforcement actions, but in some cases, the whistle-blowers’ attorneys lawyers have stepped forward. In March, 2018, the law firm Labaton Sucharow said it represented the whistle-blowers who got the US$83-million for tips that led to a 2016 enforcement action against Merrill Lynch that yielded a US$415-million settlement.

The Ontario program is more limited than the SEC’s. While the SEC is willing to pay out 10 per cent to 30 per cent of whatever money it collects, the range for awards from the OSC is 5 per cent to 15 per cent of the sanctions, up to a maximum of $5-million.

The concept of paying for information has triggered a robust debate in Ontario, where some have raised ethical questions about the practice. At the time the program was instituted, the OSC argued that the trade-off was worth it, considering insiders have crucial information that is needed to build cases, and they risk blow-back from coming forward. A reward, then, can serve as an incentive.

There are also limits as to who can receive payments. People who are convicted of a criminal offence related to the tip, for one, won’t be eligible for payouts. The regulator also stated that employees who provide false information cannot receive whistle-blower payments, to prevent vindictive employees from going to the OSC with bad information.

On Wednesday, OSC chair Maureen Jensen said in a statement that the info received has been extremely helpful, and that it “would not be possible without courageous individuals willing to come forward and provide valuable information about harm to Ontario’s capital markets.”

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Whistle-blowers can submit a report via mail or online.

With reports from Janet McFarland

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