Ruth Christy, Paul Fontes and Paul Fontes discuss the issue of whistleblowing in financial services and the developments that have taken place.
Gareth Snell, MP, became the latest campaigner on 18 December 2024 to introduce a new whistleblowing law to Parliament, in an effort to enhance whistleblowing laws introduced first in 1998. Since movements like #MeToo have gained momentum, two private member’s bills were presented to Parliament in 2022 and 2024.
The latest bill is expected to be discussed by the Parliament in April of 2025. Even though private members’ bills are not often accepted into the Statute Book of Canada, this bill is a sign of increased attention by legislators and regulators to whistleblowing.
The need for improved whistleblowing laws has been highlighted by recent and proposed law changes, the constant stream of news reports about wrongdoing and, in some cases, the treatment of the people who report it. Some have even argued for financial incentives in order to encourage whistleblowers.
Lessons from Financial Services
Since the 2008 financial crises and the subsequent scandals and inquiries, and regulatory findings, whistleblowing in the financial services industry has been a top priority.
The Employment Rights Act 1996 provides protection for whistleblowers. It focuses on “workers”, who disclose wrongdoings to employers, “other responsible persons” and “prescribed people”. Both the Financial Conduct Authority and Prudential Regulation Authority are “prescribed people”.
Whistleblowers are protected against dismissal and other adverse treatment if they make qualifying disclosures. This is provided that they believe the disclosures are true.
The FCA rules also make it clear that any adverse treatment of a Whistleblower by a regulated firm is a serious issue which could call into question whether the firm, or the relevant staff members are fit and proper.
Moreover, some firms, such as banks, building society and large insurers, must also have appropriate and effective arrangements in place for the disclosure by whistleblowers of concerns (including letting all staff know that they can directly report these concerns to the FCA and PRA), and provide training to their entire UK staff.
City Sexism inquiry
In 2023, the Treasury Committee’s Sexism in City investigation focused on the barriers women face in this sector. These included gender pay gaps, harassment, and misogyny.
The report concluded that there had been little progress since the last similar investigation in 2018. It was also “appalled by” testimonies about sexual harassment within this sector. The committee heard that whistleblowing procedures in companies were not always effective in tackling bad behavior or protecting those who report sexual harassment. It recommended that the government strengthen its whistleblowing laws.
The government of the time was conducting a review of whistleblowing legislation, but it never published its findings.
The Inquiry recommended that the FCA also launch a campaign to raise awareness of its whistleblowing policy and clarify that a nondisclosure contract (NDA), does not prevent an individual from reporting harassing behaviour. The Inquiry suggested that data be collected on the extent to which NDAs are used in cases of nonfinancial misconduct. The Inquiry recommended that data be collected on the extent of NDAs used in cases of non-financial misconduct (e.g.
Non-financial misconduct
The FCA will publish the results of its survey in October 2024 of over 1,000 banks, wholesale insurers and brokers on how they record and manage allegations of financial misconduct.
In the findings, it was found that while whistleblowing is a common method of identifying misconduct in banks, there were no whistleblowing policies in all the firms surveyed. The FCA expects firms to use survey data to assess whether their processes, procedures, and controls are robust enough to allow them detect and address any misconduct.
In early 2025, new FCA regulations on non-financial misbehavior are expected to follow the survey. Now is a good time for financial service firms to review their whistleblowing policies and make sure they offer an effective way of identifying fraud.
Implications to all employers
In fact, the Economic Corporate Crime and Transparency Act of 2023 requires that all companies have reasonable fraud prevention procedures in place. This is the perfect time to evaluate the effectiveness of whistleblowing policies.
Employers can learn from workers’ unwillingness to report wrongdoing. No matter if the new bill is passed or not, employers must ensure that their whistleblowing policies have been well publicized, are supported by the top and that whistleblowers won’t face retaliation.
If employers cannot demonstrate that they have done this correctly, it is likely at some point that more legislation and regulations will be introduced. We might even see financial rewards for whistleblowers.
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