The unfounded fear that whistleblower programs hurt internal compliance and disclosure programs now is being raised in Canada following an announcement by the Ontario Securities Commission that it is considering implementing a whistleblower program.
Edward Waitzer, a partner at Stikeman Elliot LLP, raised this concern in a commentary, Should We Pay for Whistleblowing?, published in the Financial Post.
Dimitri Lascaris, a partner at Siskinds LLP, correctly observes in his response that it would be very instructive to consider the history of whistleblower awards in the U.S. in evaluating whether to adopt such a regime in Canada. During the 25 years that the modern False Claims Act — which has no internal reporting requirement — has been in existence, there has been no evidence that financial rewards for whistleblowers have had a negative effect on internal compliance programs. On the contrary, before the 1986 FCA amendments, few government contractors had internal compliance programs, much less effective ones. Since Congress enacted the FCA in 1986, compliance programs among government contractors have exploded, and many of them are excellent. Where companies have implemented good programs, employees have used them rather than going to court. Employees only circumvent the bad programs, ones where it is known that internal reporting is tantamount to career suicide.
Canada should rely on experience rather than rhetoric in deciding whether to adopt a similar set of incentives for its securities markets.