The Ontario Superior Court has released the first judicial interpretation of the anti-reprisal provisions of Ontario’s Securities Act.

In McPherson v. Global Growth Assets Inc, the Court found that the termination of a senior executive was an act of retaliation for raising compliance concerns. This landmark ruling offers critical guidance regarding the scope of whistleblower protections and the significant risks associated with retaliatory conduct.

Background

Ian McPherson served as the CEO of Global Growth Assets Inc. and Global RESP Corporation (“Global”), an investment fund management firm. He also held the position of Ultimate Designated Person, responsible for ensuring Global’s compliance with Ontario securities laws. In that capacity, Mr. McPherson was tasked with leading the firm’s compliance efforts after sanctions were imposed on Global and its founder.

Mr. McPherson began his employment with Global in September 2018. Soon after, he raised concerns that the company’s founder and the founder’s daughter were undermining his authority and improperly influencing Global’s operations. In January 2019, the company removed the founder’s daughter from Mr. McPherson’s supervision. He cautioned that this decision interfered with his statutory duties as the Ultimate Designated Person.

On February 28, 2019, Global terminated Mr. McPherson’s employment without cause. He subsequently commenced an action for wrongful dismissal and unlawful reprisal under Ontario’s Securities Act (the “OSA”). Global filed a counterclaim alleging slander, interference, and negligence.

Anti-reprisal protections

The OSA was amended in 2016 to include new anti-reprisal provisions, now found in Part XXI.2. These provisions established protections for employees working for companies regulated by Ontario securities law against retaliation for engaging in whistleblower activities.

Employees are protected when they provide information to their employer or to the Ontario Securities Commission about conduct they reasonably believe is in breach of Ontario securities law. The OSA identifies several forms of prohibited retaliation, including threats, discipline, demotion, or termination, and gives employees a statutory right to bring an action if they experience reprisals. The burden of proof lies with the employer, which must show that no prohibited retaliation occurred.

Decision

Before the McPherson decision, the anti-reprisal provisions of the OSA had not been interpreted by the courts. Justice Centa’s ruling was the first to address these provisions directly. His analysis clarified how the general principles of statutory interpretation apply to the new framework and provided practical guidance for how similar cases may be assessed in the future.

In reaching his decision, Justice Centa considered the following:

  • Reasonable belief: Mr. McPherson reasonably believed that Global was acting contrary to Ontario securities law by interfering with his responsibilities as Ultimate Designated Person. The Board’s decision to remove a key employee from his oversight was particularly concerning, as that employee had previously been found to have violated securities laws.
  • Whistleblowing activity: On four separate occasions, Mr. McPherson either expressed an intention to provide information, or actually provided information, about conduct he reasonably believed contravened Ontario securities law. His concerns carried particular weight given Global’s prior history of securities law violations and regulatory sanctions.
  • Reprisal: Mr. McPherson’s dismissal was at least partly motivated by his intention to report conduct he believed violated securities law. Justice Centa emphasized that even if an employer has other valid reasons for termination, such as performance concerns, it will still constitute an unlawful reprisal under the OSA if any part of the motivation is linked to the employee’s engagement in a protected whistleblowing activity.

Damages

If an employer is found to have committed a violation under Part XXI.2 of the OSA, the Court may order an employee’s reinstatement with back pay, or award damages equal to up to twice the amount of the remuneration the employee would have received to the date of the order.

Justice Centa awarded Mr. McPherson $5,379,808.22, representing his outstanding compensation up to the date of termination, plus double the base salary and bonuses he would have earned during the 6.5 years between his termination and the release of the decision.

Justice Centa dismissed Mr. McPherson’s separate claim for wrongful dismissal, finding that the statutory damages already exceeded the severance package he had sought. Justice Centa declined to award aggravated or punitive damages, reasoning that the substantial reprisal damages were sufficient to serve as a deterrent against similar conduct in the future.

Key takeaways

The McPherson decision highlights the broad scope and significant implications of the anti-reprisal provisions under the OSA. It also provides important guidance on the level of protection that may be afforded under comparable provisions in other statutory regimes.

Employees are protected when raising concerns regarding their employer’s compliance with Ontario securities law, both internally and with regulators, provided they hold a genuine and reasonable belief that a breach has occurred. Employers, in turn, bear the burden of proving that no reprisal took place.

Where documentation is incomplete or evidence fails to clearly explain the rationale for an employer’s actions, courts are more likely to infer retaliatory intent. Importantly, a whistleblower complaint need only form part of the motivation for retaliatory conduct; it does not need to be the sole or primary reason.

Finally, the case highlights the potential severity of statutory damages available under the OSA. Awards may include double remuneration from the date of termination, without any reduction for mitigation. This creates significant potential exposure even for short periods of employment. In McPherson, the Court awarded compensation equivalent to roughly 13 years of earnings, despite Mr. McPherson having worked at Global for less than 6 months.