One of the major criticisms was that warnings given about London Capital and Finance and Blackmore Bond ahead of their collapses were not heeded.
Last year, the FCA took steps to encourage whistleblowers to call out financial institutions for various acts of wrongdoing via the launch of its "In confidence, with confidence" campaign. However, recent data suggests that these measures have failed to produce the desired results.
Whistleblowing is a topic attracting attention beyond the financial services industry; the whistleblowing bill, which was introduced to the House of Commons on April 26 2022 by MP Mary Robinson, seeks to establish an independent Office of the Whistleblower to tackle the many issues facing whistleblowers.
FCA whistleblowing data is less than encouraging.This article considers the level of success that the FCA has achieved so far in encouraging and protecting whistleblowers, the stumbling blocks that appear to be inhibiting substantive progress, and how whistleblowers may best navigate the risks of the current landscape.
The FCA launched its "In confidence, with confidence" campaign in March 2021, signifying a commitment by the FCA to hear whistleblowers out directly where they decide not to use internal company channels, perhaps out of fear of the consequences or distrust of the internal process.
A reporting individual has a dedicated case manager, is able to meet with the FCA to discuss any concerns and can receive optional regular updates throughout the investigation.
As part of the campaign, the FCA also produced a digital toolkit for “industry bodies, consumer groups and whistleblowing groups to encourage individuals to have confidence to step forward”.
The campaign was heavily endorsed by Mark Steward, executive director of FCA enforcement and market oversight, who stated: “We want all whistleblowers to feel welcomed by us and to feel safe because of us.”
Lacklustre results
More than a year on from the inception of the campaign, the FCA whistleblowing data is less than encouraging, suggesting that the campaign has not yet resulted in an increase in whistleblowing reports.
The FCA’s whistleblowing data from Q4 2021 showed that 279 new reports were received that quarter, roughly the same number as the previous quarter (289).
There are several reasons why the FCA’s campaign may not be having the desired effect.
The FCA’s campaign is silent on whether a whistleblower might receive immunity.Firstly, the chance of a negative impact on employment following a whistleblowing report is high. In contrast to the figures from the FCA flat lining, whistleblowing charity Protect reported a 20 per cent increase in whistleblowing cases across 2020.
Whistleblowers in many sectors theoretically receive protection. The Public Interest Disclosure Act 1998 incorporated the whistleblowing provisions into the Employment Rights Act 1996, with the intention of protecting whistleblowers and therefore encouraging them to flag wrongdoing or dangers such as risks to health and safety.
Nonetheless, the outcomes for a significant proportion of those who blew the whistle were unfavourable. Of the 3,845 whistleblowers who sought advice, one in four who contacted the advice line between September 2020 and March 2021 to report Covid-19 issues such as furlough fraud and risk to public safety were dismissed.
Secondly, where the whistleblower has themselves been party to the conduct that they are complaining of, the risk of finding themselves facing regulatory or criminal sanction can be significant. The FCA’s campaign is silent on whether a whistleblower might receive immunity.
FCA backlog
Thirdly, it may be that there is a steeper yet simpler hurdle. The FCA whistleblowing team has not increased its capacity since 2020, despite the ever-rising backlog of claims.
In its press release announcing the "In confidence, with confidence" campaign, the FCA stated that “every report the FCA receives is reviewed”, however, data from May 2022 shows that the FCA has fully assessed less than 25 per cent of the reports it received in 2021.
Of course, the title of the campaign is not ‘In confidence, with confidence, and in a timely manner’, yet the timeliness of the review is crucial.
The whistleblowing bill offers some reassurance that whistleblowing is moving up the agenda.Steward told attendees at the regulator’s annual public meeting that “neither in the case of LCF nor Blackmore did we receive any whistleblowing intelligence from anyone who would be classed as a whistleblower under the Public Interest Disclosure Act”.
Yet even if they had received a complaint, would it have been reviewed in time for the report to have been acted upon? Steward acknowledged that the FCA “lacked a broader triage for all other types of intelligence… and this is absolutely something that is front and centre in the transformation agenda”.
Also concerning is the fact that of the 25 per cent that have been properly reviewed, only seven resulted in “significant action”.
Based on Steward’s comments at their most recent annual meeting, the FCA seems conscious of its shortcomings, however whether that will translate into workable improvements or if it will be curtailed by a lack of resources is yet to be seen.
The whistleblowing bill offers some reassurance that whistleblowing is moving up the agenda, and that protection for the important public service that whistleblowers provide will be encouraged and more widely safeguarded. If the bill becomes law and the Office of the Whistleblower is established, it can learn from the FCA’s experience.
Tasha Benkhadra is an associate at Corker Binning
