Financial Conduct Authority  

The FCA wants more whistleblowers: Here’s what it should do

Erika Kelton

Once again the Financial Conduct Authority has run into a buzzsaw of criticism over its perceived failure to take whistleblower information seriously.

The latest criticism, in which the FCA’s efforts were called a “farce” by a whistleblower who reported concerns to the watchdog, came after the agency took some positive steps to strengthen its whistleblower programme following a drop in the annual number of whistleblowers coming forward to report wrongdoing in the financial sector.

Farce or not, the FCA’s actions are far from sufficient. The regulator needs to do more if it truly wants to attract more whistleblowers with information about serious misconduct.

As an attorney who represents whistleblowers from all over the world, I have some advice.

First, the FCA must build trust and confidence in its system. Whistleblowers need to know that the FCA has their backs, if they decide to take the risk of reporting wrongdoing. They can send this message in many ways:

  • The FCA must be responsive. Many whistleblowers have criticized the FCA for failing to respond when they have provided information about wrongdoing and to take steps to stop the reported misconduct. There is no quicker way to kill a whistleblower programme than to ignore those who are trying to provide information about violations.
  • The FCA also must reinforce relevant anti-retaliation rules for FCA-regulated companies by publicly challenging companies that chill or impede whistleblowing or that retaliate against whistleblower employees.
  • The FCA should closely monitor whistleblower cases brought before tribunals in case there are any important public policy implications. 

Whistleblowers need to see the FCA publicly supporting legitimate whistleblowing and advocating for employees’ rights.

Second, the FCA should reverse its position opposing whistleblower rewards and support changes in the law to make that happen. Rewards are essential to get many of the most well-placed and informed whistleblowers in the financial services industry to come forward, particularly those at high levels in their firms.

This is demonstrated by the success of the US Securities and Exchange Commission’s whistleblower programme.

Both the FCA and SEC offer whistleblowers confidentiality and job protection. But the critical difference between the two programmes is that the SEC programme also rewards whistleblowers whose information leads to a successful enforcement action.

That difference partially explain why the number of annual whistleblower reports to the SEC has jumped from 3,923 to 6,200 over the past five years, whereas the number of whistleblower reports to the FCA during that same period have remained static at around 1,100.

This year, the number of whistleblower reports to the FCA has dropped 9 per cent, according to media reports, compared to last year’s 1,153.

If the UK wants to avert major losses from another major financial scandal – such as caused by financial institutions improperly selling billions of pounds in payment protection insurance, Tesco’s £250m accounting scandal or banks rigging foreign exchange rates – it must put aside any cultural distaste for rewarding whistleblowers and recognize their value and the sacrifices they make.

The insistence that people should blow the whistle simply because it is the “right thing” to do ignores the reality that whistleblowing comes with a heavy price. Very few are willing to lose their income and create hardship for their family in exchange for doing the right thing.

Dozens of UK whistleblowers have contacted us about filing possible whistleblower claims in the US to take advantage of the protections and rewards.

In cases where the misconduct is not within the SEC’s jurisdiction, every individual has declined to report the matter to the FCA because there is no reward to balance the risks they take by blowing the whistle. Honestly, who can blame them for keeping quiet when they stand to risk everything?