FCA focus on personal accountability driving increase in financial firm whistleblowing, says expert

Michael Ruck, a financial regulation expert at Pinsent Masons, the law firm behind Out-Law.com said that senior staff at authorised firms were becoming "more aware of their compliance obligations" following recent regulatory initiatives. Figures obtained from the FCA showed a 44% increase in whistleblowing cases opened in 2014 compared to 2013; and a 142% increase compared to 2012, the last year under Financial Services Authority (FSA) supervision.

"In the past people often turned a blind eye to wrongdoing for fear of rocking the boat, but this is increasingly no longer the case," said Ruck. "Now more than ever firms need to make sure that they have an appropriate regime in place to help identify issues and remedy them before they become a significant regulatory or legal failing."

The term 'whistleblowing' refers to an employee telling a prescribed person or a person in authority at their employer about alleged dishonest or illegal activities occurring within the organisation or company. Whistleblowers may make their allegations to other parties in the company, known as 'internal' whistleblowing; or to external regulators, law enforcement or the media, the last of these in more limited circumstances. Legal protections for whistleblowers protect employees who make disclosures of certain types of information from retribution by their employers.

Unlike in other countries including the US, UK whistleblowers do not receive financial incentives for reporting dishonest or illegal activities. However, the government's Department for Business, Innovation and Skills (BIS) and Home Office are currently considering whether to introduce incentives in suspected cases of fraud, bribery and corruption. Banks, building societies and other firms regulated by the Prudential Regulation Authority will also be required to appoint a senior manager to act as 'whistleblowers' champion' once the regulator's new Senior Management Regime comes into force.

According to the figures, the FCA created 1,367 cases after receiving information through its whisteblowing process last year and went on to open intelligence reports in 73% of these cases. In 2013, it opened 948 cases and created intelligence reports in 868 of these.

Separate whistleblowing figures published by the Securities and Exchange Commission (SEC) (34-page / 1.3MB PDF) showed that most of the whistleblowing reports received by the US regulator from overseas came from the UK. Financial regulation expert Michael Ruck said that these figures showed that the UK was not only more aware of its responsibilities, but also that "individuals and firms in the UK will blow the whistle in an incentivised regime more than any other country".

"Should incentives for whistleblowers be introduced as a result of the ongoing review by the Home Office and BIS on this issue this would almost inevitably lead to a further surge in whistleblowing as white-collar informants seek big payouts," he said. "One can only wonder about the size of such potential payouts with the SEC last year paying out a record high of more than $30 million to a single whistleblower."