Advisors: Risks too high under whistleblower proposal

Advisors: Risks too high under whistleblower proposal

Advisors: Risks too high under whistleblower proposal Concerns about an OSC whistleblowing proposal are starting to surface from advisors worried it will blow holes in internal compliance systems.
 
“The incentives are strong but the risks are even stronger,” said John DeGoey, a portfolio manager at Burgeonvest Bick Securities Ltd. “Obviously you risk being a pariah for the rest of your career, so confidentiality is key. I’m not sure (they have a handle on that just yet). There’s a 100 per cent risk of hatred, but a 50 per cent chance your allegations would be proven so it’s a tough position to be in.”
 
His comments come after a compliance professional was awarded almost $1.6-million from the SEC for serving an informant on wrongdoings within his own company. The investigation would lead to charges.
 
“The SEC said, in a statement that the compliance officer “had a reasonable basis to believe that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors.”
 
In the States, it is required by law that the SEC protect the confidentiality of the compliance officer, and similar regulations proposed by the OSC would ostensibly extend protections.
 
However, advisors remain skeptical about whistleblowing due to long-term risks while others believe it will weaken internal compliance departments.
 
With a roundtable due to take place on May 4, OSC staff are still seeking input from investors, financial professionals and the securities litigation bar on Consultation Paper 15-401 Proposed Framework for an OSC Whistleblower Program until May 4, 2015.
Under the program, rewards for whistleblowing could rise as high as $1.5 million, which makes it all the more important for advisors and other professionals to ensure they have the evidence.
 
“It’s going to require that the people have a definitive smoking gun, evidence to prove their allegations,” DeGoey said. “Directionally, it’s smart but I’ll believe (the effects of what they’re trying to do) when I see it.”