Whistleblowers and the lawyers who support them
Those often best placed to identify wrongdoing are company insiders, but coming forward can be an extremely difficult decision
Detecting securities fraud and misconduct by market participants can sometimes be difficult for even the most vigilant regulator.
Those often best placed to identify wrongdoing are company insiders, making them an essential piece of the securities enforcement puzzle.
People who expose wrongdoing are generally regarded as whistleblowers, although the term may have a narrower meaning in some contexts. Bruce Dorris, president and CEO of the Association of Certified Fraud Examiners (ACFE), says that whistleblower tips are by far the most common way fraud schemes are detected.
To encourage whistleblowers to come forward with information about securities wrongdoing, different securities regulators in Canada and other countries have established whistleblower programs.
As the regulatory agency responsible for administering the province's securities laws, the Alberta Securities Commission (ASC) launched its whistleblower program in 2018 to enable people to provide critical information about securities misconduct with increased confidentiality protections and without fear of repercussion.
Whistleblower tips help the ASC identify and investigate potential violations and take action to stop them. In this way, whistleblowers can support the Commission's mandate of fostering a fair and efficient capital market in Alberta while protecting investors.
The province’s Securities Act defines a whistleblower as an employee (or former employee) who voluntarily reports securities-related wrongdoing by their employer to the ASC. In this context, employees include officers, directors, and independent contractors of a company (or their affiliates). As insiders, employees are more likely to be aware of wrongdoing than outsiders. In a 2023 joint report, the ACFE and the Institute of Internal Auditors found that more than half of whistleblowers who helped uncover fraud schemes were employees of the affected company.
The Securities Act deliberately confines the definition of “whistleblower” to employment-type relationships to ensure that anti-reprisal protections are available to those who submit tips.
Blowing the whistle can be highly risky, exposing whistleblowers to potential loss of livelihood and other serious repercussions. These risks are mitigated through legal protections provided in the Act, such as confidentiality, prohibition of reprisal and immunity from liability.
The identity of a whistleblower is confidential and can only be disclosed under limited circumstances, including where the whistleblower and the Commission’s executive director consent to its disclosure. A whistleblower can also submit a tip anonymously.
In addition, employer reprisals against a whistleblower are prohibited. This includes any measure that adversely and materially affects a person's employment or working conditions, and are intended to punish them for reporting wrongdoing. An employer that takes reprisal measures against a whistleblower may be liable to administrative sanctions by the Commission and civil action by the whistleblower. In an anti-reprisal civil action, the defendant has a reverse burden of proof to show that their action against the whistleblower was not linked to their whistleblowing.
Lastly, terms in employment contracts or policies purporting to prohibit, limit or restrict whistleblowing are unenforceable against a whistleblower. Similarly, a whistleblower is not liable to their employer in any matter they report to the Commission, provided they reasonably and honestly believed the information to be true when it was reported.
If a whistleblower is involved in the wrongdoing they reported, they may be eligible for reduced sanctions or other credits under the Commission’s credit for exemplary cooperation policy. However, the policy does not apply when the situation involves a recidivist, organized crime, fraud, a breach of a court order, or a securities-related market ban, and no credit will be given.
Lawyers can support the whistleblower program in several ways. Reporting wrongdoing can be an extremely difficult decision, especially when it involves one’s employer. Therefore, individuals seeking to report securities wrongdoing may require legal assistance.
Lawyers can also support anonymous whistleblowers and provide a valuable public service by being the point of contact between them and the Commission.
Additionally, they can help whistleblowers enforce their legal protections. Lawyers who represent capital market participants can assist with ensuring they're complying with the law regarding securities whistleblowing.
By supporting the program, the legal profession can play a unique role in fostering a fair and efficient capital market and protecting investors in Alberta. Implicit in this public interest cause is an emerging business opportunity, as it's safe to say that whistleblowers need lawyers, and lawyers need whistleblowers.
To learn more about the program, please contact the ASC Office of the Whistleblower at 1-833-295-4387 or owb@asc.ca.
