HEIDI FRANKEN on eth­i­cal in­no­va­tion in Fi­nance

The head of the OSC’S Of­fice of the Whistle­blower de­scribes its creative so­lu­tion for end­ing se­cu­ri­ties mis­con­duct.

Rotman Management Magazine - - FROM THE EDITOR - In­ter­view by Karen Chris­tensen

You head up the On­tario Se­cu­ri­ties Com­mis­sion’s new Of­fice of the Whistle­blower. What is its mis­sion?

The pro­gram is pri­mar­ily an in­vestor pro­tec­tion pol­icy aimed at se­ri­ous se­cu­ri­ties mis­con­duct. This mis­con­duct can be dif­fi­cult to de­tect with­out the as­sis­tance of a knowl­edge­able whistle­blower. The ear­lier we know about mis­con­duct, the more pro­tec­tive or­ders we can is­sue, the greater our abil­ity to min­i­mize harm to in­vestors and, there­fore, the stronger the de­ter­rent mes­sage.

We did ex­ten­sive re­search on pro­grams in Canada and around the world, in­clud­ing the Se­cu­ri­ties and Ex­change Com­mis­sion’s (SEC) pro­gram in the U.S. We then de­signed a pro­gram spe­cific to On­tario’s needs that not only of­fers ex­cel­lent in­cen­tives for whistle­blow­ers to come for­ward and report mis­con­duct, but also of­fers im­por­tant pro­tec­tive mea­sures for them.

A re­cent SEC study found that 80 per cent of whistle­blow­ers re­ported the mis­con­duct to the SEC af­ter try­ing to raise their con­cerns in­ter­nally. Why would that be?

As you in­di­cate, a large ma­jor­ity of whistle­blow­ers at­tempted to report in­ter­nally first. This in­di­cates to us that

com­pa­nies not only have to fo­cus on how to in­take tips — for in­stance, through a whistle­blow­ing hot­line — but also on how they deal with the com­plaints that do come in. Clearly, these pro­ce­dures are not as ef­fec­tive as they should be, and the re­sult is that the whistle­blower feels that their con­cerns have not been heard.

One of our goals is to change the cul­ture around whistle­blow­ing. We know from our own re­search that what mo­ti­vates whistle­blow­ers to report is sim­ple: They want the mis­con­duct to stop. It is very im­por­tant that there be a tone at the top that sup­ports and val­ues whistle­blow­ing, and these in­di­vid­u­als need to be­lieve that they can come for­ward with­out fear of reprisal. Whistle­blow­ers take per­sonal and pro­fes­sional risks by speak­ing up about mis­con­duct and they’re only go­ing to do so if they feel they can come for­ward in a safe and pro­tected way.

Com­pa­nies should also look at their board’s in­volve­ment in the re­port­ing process and whether em­ploy­ees fully un­der­stand the in­ter­nal re­port­ing sys­tems in place. Sadly, in many cases com­pli­ance and in­ter­nal con­trol sys­tems are not work­ing as ef­fec­tively as they could.

Does that 80 per cent num­ber re­flect what’s hap­pen­ing in Canada as well?

It’s still early days for our pro­gram, so it’s dif­fi­cult to quan­tify, but I can tell you that anec­do­tally, in­di­vid­u­als do want to report and han­dle these things in­ter­nally. They want to stay em­ployed with their em­ployer, and they want the mis­con­duct they have ob­served to be ad­dressed, so they can move on.

We don’t re­quire whistle­blow­ers to have re­ported in­ter­nally be­fore they come to the OSC, but we en­cour­age them to do so. For ex­am­ple, the Whistle­blower Award that we of­fer is in a range of five to 15 per cent of to­tal sanc­tions or­dered, where the sanc­tions ex­ceed one mil­lion dol­lars. Where a whistle­blower lands in that range is based on a num­ber of fac­tors, but if they re­ported in­ter­nally first, be­fore re­port­ing to us, this would be a pos­i­tive fac­tor that could in­crease the award.

One of your goals is ‘cred­i­ble de­ter­rence’. What does that look like? Can you de­scribe how a typ­i­cal mis­con­duct case un­folds?

Ob­vi­ously, con­fi­den­tial­ity for our whistle­blow­ers is of pri­mary im­por­tance to us, so I can’t get into specifics, but I can gen­er­ally de­scribe the process. Whistle­blower re­ports

One of our goals is to change the cul­ture around whistle­blow­ing in this coun­try.

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