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Paul Lalonde is a board member and legal committee chair for Transparency International Canada, and a partner at Dentons Canada LLP.

Whistle-blower protections play a vital part in combatting corruption and bribery. The Government of Canada has recognized this in a number of international conventions it has signed. Canada has also adopted some specific whistle-blower protections for the public service and has made it an offence under the Criminal Code for an employer to retaliate against a whistle-blower.

Unfortunately, whistle-blower protection in Canada remains uneven and inadequate. For example, there is very little in terms of protections adopted at the provincial and municipal level. In a soon-to-be-published paper, Transparency International Canada concludes that whistle-blower protections in Canada are insufficient, fall short of Canada's international commitments and fail to keep up with the efforts of other leading countries, such as Britain, the United States and Australia, which have adopted more robust whistle-blower protection laws.

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In that context, the Ontario Securities Commission's recent announcement that it is interested in adopting a whistle-blower program is a huge leap forward. Among other things, the OSC proposes to offer whistle-blowers a financial award, or bounty, for providing the OSC with timely and credible information that leads to the imposition of a monetary sanction under the Ontario Securities Act. The financial award would be up to 15 per cent of the total sanction or settlement paid in a commission proceeding where the total sanction exceeds $1-million. The maximum amount of any award to a whistle-blower would be capped at $1.5-million.

Proponents of whistle-blower bounties are cheering on the OSC. They maintain that bounties are good policy for a simple and compelling reason: They work. Where they have been adopted, they have resulted in more investigations and more prosecutions, and they have deterred bad corporate behaviour. They also provide some measure of compensation for whistle-blowers, who often come forward at great personal and financial cost.

On the other hand, critics of bounties maintain that they create perverse incentives, rewarding individuals for doing what they should have done anyway, and that they undermine the operation of internal corporate compliance and whistle-blower programs.

Internal compliance programs are the first line of defence against corporate wrongdoing, and enforcement authorities (not just securities regulators) are pressing companies to adopt robust and costly internal compliance programs that include whistle-blower programs.

The expectation underlying major corporate investments in compliance programs is that they will be considered by authorities in deciding whether the corporation itself willfully participated in wrongdoing or if it was a victim of some bad apples.

The strength of a corporate compliance program is also a factor considered in sentencing in the event the corporation is found guilty of an offence.

In these ways, the law strongly encourages companies to adopt sophisticated compliance programs, which in turn is supposed to reduce corporate wrongdoing. Therefore, it seems illogical for the authorities to adopt measures that encourage employees to go directly to the authorities (in the hopes of landing a windfall) and to bypass the internal reporting mechanisms that were adopted by companies at the insistence of the same authorities.

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Whistle-blower bounties have been around in the United States for a long time.

The largest bounty, $104-million (U.S.), was paid in 2012 by the Internal Revenue Service to Bradley Birkenfeld, a former UBS banker who revealed a major tax-evasion scheme. Mr. Birkenfeld secured this massive bounty after himself serving jail time for his role in the scheme.

The idea that someone who actively participated in a scheme and who was personally found guilty of offences could then go on to receive such a massive windfall will likely strike most Canadians as distasteful and out of step with our legal traditions.

But, perhaps, between the opposing views on bounties, a great Canadian compromise is possible. Maybe bounties of the magnitude that have been paid in the United States (including to individuals who actively participated in wrongdoing) are disproportionate.

Perhaps an approach designed to compensate whistle-blowers for the harm they suffer as a result of coming forward would work better here.

The OSC's initiative may or may not be the right course to improve whistle-blower protections and corporate compliance in Canada, but it's about time we had the conversation.

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Whistle-blowers who come forward in good faith often do so at great personal and financial cost. We need to look carefully at any measure that encourages them to come forward and that protects them from retaliation.

Are bounties the right solution for Canada? Let's talk about it.

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