The Ontario government enacts first ever whistleblower protection in the Canadian pension regulatory sector
On December 9, 2021, the Ontario government proclaimed in force amendments to the Financial Services Regulatory Authority of Ontario Act, 2016 (the FSRA Act), to provide protection for persons or entities who report suspected contraventions of Ontario pension law (or law applicable to any other sector regulated by the Financial Services Regulatory Authority of Ontario (FSRA)). This is the first time that whistleblower provisions have been introduced into legislation governing Ontario’s pension regulator and such provisions could result in an increase in regulatory investigations by FSRA, based on the experience of other regulated sectors where similar provisions have been adopted.
Who is a whistleblower?
Under the amendments, a person or entity is afforded protection or is a “whistleblower” if:
- such person or entity discloses to the Chief Executive Officer of FSRA (the CEO), in good faith, an alleged or intended contravention of the Ontario Pension Benefits Act (PBA) or such other statute listed in or prescribed under the definition of “regulated sector” in the FSRA Act;
- the person or entity requests that their identity as a whistleblower be kept confidential; and
- the CEO provides the person or entity with an assurance of confidentiality.
Requirement of confidentiality
The amendments require the CEO to keep confidential and not disclose the identity of a whistleblower, which includes any information or record that may reasonably be expected to reveal the identity of a whistleblower, except if the whistleblower consents to his or her identity being disclosed or the whistleblower’s identity is disclosed to a law enforcement agency because the CEO has reasonable grounds to believe that the whistleblower has committed a criminal offence or an offence under the PBA (or other legislation regulated by FSRA) that is related to the whistleblower’s disclosure.
No reprisals against whistleblowers
The proposed amendments prohibit reprisals against a whistleblower, whether directly or indirectly, for making disclosure to the CEO. The prohibited reprisals include terminating the whistleblower’s employment or contract, demoting, disciplining or suspending the whistleblower, penalizing or withholding a benefit from the whistleblower (or threatening any of these), intimidating or coercing the whistleblower in relation to the whistleblower’s employment or contract, and otherwise detrimentally affecting the whistleblower by any act or failure to act, regardless of whether the act or failure to act is related to the whistleblower’s employment or contract. It seems as though this prohibition against reprisals could, in addition to employees, also apply to consultants and other advisors who blow the whistle on a pension plan administrator.
Penalties for reprisals
Persons found to have contravened the prohibition against reprisals could be subject to penalties. For example, if an employee’s manager becomes aware of a disclosure made by the employee to the CEO that the employer is not complying with the PBA with respect to enrolling certain eligible employees in the pension plan, and as a result, threatens to demote or not pay a bonus to the employee, then the employer could be subject to penalties. In addition, every director or officer of the employer corporation who directed, authorized, assented to, acquiesced in or participated in the commission of the offence, or who failed to take reasonable care to prevent the corporation from committing the offence, could potentially be guilty of an offence under the FSRA Act, whether or not the corporation has been prosecuted or convicted. Similar rules apply where the employer is a partnership.
Prohibition regarding agreements
Further, the amendments to the FSRA Act make void a provision in an agreement, including a confidentiality agreement, that precludes or purports to preclude a person or entity from whistleblowing, co-operating in an investigation, examination or inspection in respect of the disclosure, giving evidence in a proceeding, or giving information to the CEO in respect of the disclosure.
What are the implications?
While we have not previously seen any whistleblower protections in the regulated pension sector of other Canadian jurisdictions, whistleblower programs and legislated protection exist in other financial services regulatory sectors in Canada. The Ontario Securities Commission (the OSC), for example, established whistleblower protection and financial awards for certain disclosures over five years ago. Québec’s Autorité des marchés financiers and the Alberta Securities Commission also established whistleblower protection in the securities sector but, unlike the OSC’s program, both decided against offering financial awards for disclosures.
According to the OSC’s news release in July 2021, the OSC is seeing growing success in respect of its whistleblower program. As at that date, it has received approximately 650 tips from whistleblowers across Canada and has awarded more than $8.6 million to whistleblowers. While it seems as though Québec’s program had success upon its launch, it is difficult to determine whether the lack of financial awards affects the effectiveness of Québec and Alberta’s whistleblower programs.
We anticipate that the CEO will receive some complaints or “tips” with respect to non-compliance with the PBA, which may lead to an increase in regulatory proceedings and investigations with respect to Ontario registered pension plans. However, since this is the first instance of whistleblower rules in Canada’s regulated pension sector, we will ultimately need to wait and see whether that is indeed the case.
As a reminder, the CEO has broad powers under the PBA to conduct investigations and examinations for purposes of ascertaining compliance with the PBA and its regulations, including ordering an employer or any other person to provide information and requiring the production of any document related to the pension plan. Where the CEO has reason to believe that the pension plan or pension fund is not being administered in accordance with, does not comply with, or is in contravention of the PBA or its regulations, the CEO may order a pension plan administrator or any other person to take or refrain from taking any action in respect of the pension plan or pension fund. Further, where non-compliance with the PBA has been determined, the CEO may levy an administrative monetary penalty.
What can employers do to protect themselves?
In light of these new whistleblower provisions in the FSRA Act, employers are encouraged to create policies and procedures to detect and remedy potential compliance issues as early as possible, and to protect employees and entities who come forward to report errors or issues internally. An effective internal whistleblowing policy should be supported by management and would encourage employees, plan members and contractors to report issues internally without the fear of reprisal before escalating to the regulator, particularly since the amendments to the FSRA Act do not grant financial awards to whistleblowers as seen in other whistleblowing programs currently in place. Further, such a policy may increase awareness of the higher possibility of whistleblowers disclosing suspected or actual contraventions of the PBA, leading to better compliance practices.
Where an employer already has strong controls in place to ensure it’s complying with the PBA (or such other legislation in the regulated sectors set out in the FSRA Act), employers are encouraged to incorporate whistleblowing policies and procedures as part of this compliance regime.
It will be interesting to see how FSRA will respond if there is an increase in complaints relating to regulatory compliance with the PBA due to the recently introduced whistleblower protections. In particular, will FSRA launch more regulatory investigations and use its power to levy administrative monetary penalties in response to compliance issues identified by whistleblower complaints? Time will tell, but experience in other regulated sectors suggests that increased regulatory interventions often result from the introduction of a whistleblower protection regime and plan administrators and employers would be well advised to be prepared for an increased focus on compliance investigations by FSRA going forward.