Regulators of the US financial services market have successfully concluded their first case involving whistleblower retaliation, against a firm who improperly demoted and relocated an employee who reported a conflict of interest to the Securities and Exchange Commission. Could this case be the start of a new regulatory trend that we shall see more of in other jurisdictions?
Let’s take the UK financial services market as an example, and I’ll come straight out and state that I believe that such cases will happen here, and sooner rather than later. Here’s why.
First off, I don’t see the UK regulator following the US example of providing financial rewards to substantive whistleblowers. The Financial Conduct Authority (FCA) may cover some expenses from time to time, but bounties are unlikely because they don’t fit comfortably with the UK way of effecting changes in market practices. That’s much more based around the signalling of expectations through thematic and market reviews and then scrutinising those who don’t get the message.
With whistleblowing, I think the FCA will adopt a three pronged approach. Firstly, they’ll make whistleblowing policies mandatory for all but the smallest of firms. In the meantime, before that kicks in, they’ll be casting a suspicious eye over any firm (other than the smallest) who doesn’t currently have a whistleblowing policy. An explanation will be sought and if not satisfactory, it will be marked against the firm, on the basis that it could signal the wrong sort of corporate culture.
Secondly, they’ll be looking for evidence of the extent to which the whistleblowing policy and procedures have been embedded into the firm’s working practices. Think of management systems, reports, metrics and a named person holding overall responsibility.
And thirdly, they will start punishing those who retaliate against a whistleblower and will do so through the approved persons regime. I think we’ll see a director of a regulated firm made an example of over the next three years, by having their approved status restricted or removed. The signal sent out will be that retaliation could be a career changing move.
The rationale for this third prong of what I think will be the FCA’s approach is evidenced in a report last year by the whistleblowing charity, Public Concern at Work, called ‘Silence in the City’. It found evidence of high levels of whistleblower retaliation in the UK financial services sector. The logic being used here is that there’s no point encouraging people to blow the whistle on misconduct, without first addressing the fear of retaliation. Or to put it another way, the goal will be to turn the tables and move the fear of retaliation away from the whistleblower and onto those contemplating retaliating against a whistleblower.
If a regulated individual can’t separate the message (the misconduct) from the messenger (the whistleblower), then quite rightly, there’s no place for them in UK financial services.