Ontario Announces New Amendments Aimed at Protecting Whistle-Blowers in the Non-Securities Financial Services and Pension Sectors

By: Devin Jarcaig

On April 29, 2022, the Financial Services Regulatory Authority of Ontario (the “FSRA”) announced that it would be introducing a new whistle-blower program aimed at protecting consumers and identifying misconduct in the non-securities financial services and pension sectors. The Ontario Securities Commission (the “OSC”) previously launched a whistle-blower program in July 2016, the first of its kind by a Canadian securities regulator. With the FSRA’s announcement, whistle-blowers who identify violations in the non-securities sectors will now be offered similar protections as part of a public policy mandate to protect consumers from unfair and unlawful practices in the broader financial services industry.

The new amendments to Sections 20.5 – 20.12 of the Financial Services Regulatory Authority of Ontario Act (the “FSRA Act”) provide enhanced protections for whistle-blowers in sectors that are subject to the following legislation or regulations (defined in the FSRA Act as the “Regulated Sectors”):

Key Takeaways

The amendments to the FSRA Act will apply to any individual or entity who comes forward, in good faith, with valuable, timely, and non-public (i.e. insider) information related to an alleged or intended breach of a law governed by any of the Regulated Sectors. Prior to this announcement, Ontario did not have a specific whistle-blower protection program that applied to non-securities financial and pension services. As such, potential whistle-blowers in the Regulated Sectors may have been deterred from coming forward with a report, often because they had no guarantee of confidentiality and may have been fearful of reprisal by a person or entity being accused of an alleged or intended breach. In an employment context, potential whistle-blowers might be fearful that a party might retaliate by threatening their job or complaining to their employer. The FSRA Act is designed to address these issues by offering two important protections to potential whistle-blowers:

  • It protects the whistle-blower’s confidentiality by explicitly prohibiting the FSRA from disclosing their identities; and
  • It provides sanctions and penalties against any person or entity who commits reprisal against a whistle-blower.

Under Section 20.8, the FSRA is obligated not only to keep the whistle-blower’s identity confidential, but it must also ensure that it does not disclose any information that may reasonably be expected to reveal the identity of the whistle-blower. The whistle-blower’s identity can only be disclosed if: (a) the whistle-blower consents to the disclosure; or (b) the disclosure is made to a law enforcement agency because the FSRA has reasonable grounds to believe that the whistle-blower has committed an offence under the Criminal Code or under any of the laws prescribed under the definition of Regulated Sectors. The whistle-blower’s identity may also be subject to disclosure during certain legal proceedings, if a court determines that such disclosure is necessary to show that a person did not commit the offence with which they are charged.

Significantly, Section 20.6 makes it a punishable offence for a person or entity to commit reprisal against a whistle-blower. The amendments also prohibit any party from executing any agreement (including a confidentiality agreement) that precludes a person or entity from coming forward with a whistle-blower complaint. A “reprisal” is defined as including any of the following acts:

  • Terminating or threatening to terminate the whistle-blower’s employment, contract, position or office;
  • Demoting, disciplining or suspending, or threatening to demote, discipline or suspend, a whistle-blower from their employment, position or office;
  • Imposing or threatening to impose a penalty, or withholding or threatening to withhold a benefit, related to the whistle-blower’s employment, contract, position or office;
  • Intimidating or coercing a whistle-blower in relation to their employment, contract, position or office; or
  • Otherwise detrimentally affecting the whistle-blower by any act or failure to act, regardless of whether the act or failure to act is related to the whistle-blower’s employment, contract, position or office, if any.

We can infer from the FSRA’s announcement that this definition is designed to be deliberately broad so that it includes any conduct that might otherwise detrimentally impact a whistle-blower or dissuade them from coming forward with a report. For example, this definition of “reprisal” could also be interpreted to include conduct such as making threats to commence litigation against a whistle-blower (or their employer) or inducing a third party to breach an employment contract with a whistle-blower. The parties who may be liable for an offence are also broadly defined, since Section 20.10 includes any officer, director, or “directing individual” who “directed, authorized, assented to, acquiesced in or participated in the commission of an act” or who otherwise “failed to take reasonable care to prevent the corporation from committing the offence.”

Relative to similar legislation in other jurisdictions, the penalties against any person or entity who has committed reprisal are severe. An individual convicted of an offence is liable to a fine of up to $500,000 or imprisonment for a term of up to one year, or both. Corporations are liable to a fine of up to $1,000,000. The FSRA Act also provides a number of remedies to a whistle-blower who is subjected to reprisal, including one or more of the following: (a) reinstatement of the whistle-blower to their employment, contract, position, or office with the same level of seniority; (b) payment to the whistle-blower of two times the amount of compensation they would have been paid in connection with their employment, contract, position or office between the date of the reprisal and the date of the order if the reprisal had not taken place, with interest; or (c) payment to the whistle-blower of compensation in an amount that an arbitrator or court considers just.

It is worth noting that the FSRA Act confirms that a whistle-blower cannot be held liable in any civil proceeding for making a disclosure or for bringing a complaint or civil proceeding as the result of a reprisal. Previously, in circumstances where a party has brought litigation as against a whistle-blower, the courts have suggested they will take a consistent approach. As  previously discussed in an earlier blog post, the courts have confirmed that there are remedies available to parties subjected to a “Strategic Lawsuit Against Public Participation” (a “SLAPP Suit”) designed to silence expression speaking out on matters of public interest (such as a whistle-blower complaint). It is clear that both the Courts and the legislature in Ontario want to send a strong message to consumers and other participants in the financial services industry: whistle-blowers play a vital role in identifying misconduct and bringing it to the attention of the regulatory authorities, and as such they are willing to take significant steps to ensure that whistle-blowers feel empowered to do so.

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