Whistleblowing reports to FCA fall for second year

Figures published under the Freedom of Information Act showed that in 2016 the FCA received 866 reports of wrongdoing to its whistleblowing team.

This was a reduction of a fifth in the number of reports received during 2015, when 1,105 were made to the FCA.

The number for 2015 was in itself a reduction from 2014, when there were 1,367 reports.

The figures also showed 13 per cent of reports to the FCA’s whistleblowing team in 2016 directly contributed to enforcement action or been of “significant value” to the regulator.

During 2016 six reports directly contributed to FCA enforcement action while 108 were deemed to be of “significant value”.

I think people are giving up on it because they don't see any action.Darren Cooke

Meanwhile in 2015, 19 reports directly contributed to enforcement action and 199 were of “significant value” – accounting for nearly 20 per cent of reports that year.

Of the whistleblowing reports in 2016, the FCA considered 199 might be of value but were not currently actionable.

Meanwhile 42 were deemed to be of little value and were unlikely to assist the FCA.

The number of reports which are still under consideration from 2016 was 511 – or 59 per cent of all reports.

Michael Ruck, a senior associate in Pinsent Mason’s financial enforcement team, said: “Whilst the drop in whistleblowing reports to the FCA may indicate that the FCA’s work to date in this area is not reaping benefits, it is relevant to all financial services firms that the FCA continue to use whistleblowing reports as the basis for many interventions and investigations.

“Should the FCA or others consider implementing financial incentivisation for whistleblowing in the UK, similar to the regime in the US, this may result in an increase both in the number of reports and the likelihood of senior individuals blowing the whistle on significant misconduct.

“Whistleblowing for many still results in the loss of their current employment and an almost inevitable failure to find alternative employment in the financial services industry.”

The FCA brought in new whistleblowing rules in 2015 to allow employees to raise concerns internally (i.e., to ‘blow the whistle’).

The key rules on whistleblowing require firms with more than £250m in assets to appoint a senior manager as their whistleblowers’ champion, put in place internal whistleblowing arrangements able to handle all types of disclosure from all types of person, and put text in settlement agreements explaining that workers have a legal right to blow the whistle.

They must also tell UK-based employees about the FCA and PRA whistleblowing services, present a report on whistleblowing to the board at least annually, inform the FCA if it loses an employment tribunal with a whistleblower and require its appointed representatives and tied agents to tell their UK-based employees about the FCA whistleblowing service.

In a statement, the FCA said: "The FCA has in recent years taken a number of steps to encourage whistle-blowers to come forward to the organisation, including conducting constant review (a detailed review) of its whistleblowing procedures and increasing the resources dedicated to the area.

"The number of reports we receive varies from year to year and while the number of reports received in 2016 was down from 2015 it is still significantly more than in  the financial year 2007/08 when the then Financial Services Authority received only 138."

A spokesman for the regulator said it was also possible that 2014 to 2015 represented an unusually good year for whistleblowing, given the "significant" media coverage of high profile whistleblowing cases and the publication of reports by the Parliamentary Commission on Banking Standards.

Under the Senior Managers Regime, the banking sector must put in place mechanisms to allow their employees to blow the whistle and raise concerns internally and appoint a senior person to take responsibility for the effectiveness of these arrangements.

This regime is expected to be rolled out across the financial services industry – including to advisers – in 2018.

Darren Cooke, a chartered financial planner with Derbyshire-based Red Circle Financial Planning, said: "I think people are giving up on it because they don't see any action.

"There is that feeling that you report something and you get an email saying they have got it, but you never hear anything else again.

"The reason I stared the petition against cold-calling was because two years later a business I reported was still going."

damian.fantato@ft.com