FCA failed to act on whistleblower reports about advice

FCA failed to act on whistleblower reports about advice

The Financial Conduct Authority has been admonished for its failure to properly investigate reports that unauthorised individuals were giving advice about investments.

Complaints commissioner Antony Townsend has upheld part of a complaint submitted by someone who contacted the regulator’s whistleblowing service to inform it of the behaviour at two firms.

But the FCA dismissed the report on the grounds it did not meet its risk appetite and the information provided was not detailed enough, without giving the whistleblower the opportunity to provide more information and evidence, which they had offered to provide.

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Writing to the complainant, Mr Townsend said the FCA’s grounds for rejecting the complaint were that the information provided had been appropriately considered, adding in his view “this conclusion was manifestly wrong”.

His review of the papers showed the FCA’s explanations for not acting on the information were not consistent.

“It has been suggested both that the matter could not be taken forward because of inadequate information, and that the FCA had sufficient information to determine that no further action was required,” stated Mr Townsend.

“The first explanation is inconsistent with your offer to supply further information, and the second explanation is inconsistent with the fact that the FCA – while rejecting your complaint in August 2015 – invited you to supply further information.”

He dismissed the second element of the complaint, which was that the FCA had not investigated the issue “out of loyalty to the financial services industry” and concluded instead the issue had been caused by “administrative errors, insufficient communication between departments, and insufficient rigour”.

Mr Townsend recommended the regulator carry out a proper and diligent assessment of the information and evidence the whistleblower had, as well as make a compensation payment of £300.

“In addition, I invited the FCA to consider and comment on a more general point, that is, the way information from whistleblowers is initially assessed and distributed,” he added.

“I am pleased to see that they have confirmed, in response to my preliminary decision, that they have already taken steps to improve the whistleblowing process to ensure that special care is now being taken to obtain additional information and/or evidence from whistle-blowers and provided to the relevant areas.”

The FCA is also considering additional training to ensure such errors do not occur in future, according to Mr Townsend.

Last month, the City watchdog came under pressure from the Treasury Committee and a small business lobby group to explain how it plans to improve its treatment of financial services sector whistleblowers.

This followed an Office of the Complaints Commissioner ruling in December, which stated the FCA presided over a series of events “bordering on the farcical”, adding that parts of its response were “negligent” and “defensive”, even attempting to shift the blame on to whistleblower Nicholas Wilson.