The UK’s Financial Conduct Authority (FCA) reportedly saw a 19 percent fall in the number of whistleblowing reports received in 2015, according to research obtained by law firm Pinsent Masons.
Despite the introduction of new whistleblowing procedures, 1,104 whistleblowing cases were created in 2015, down from 1,367 in 2014.
According to an article which appeared in WSJ, Michael Ruck, a senior financial services enforcement lawyer at Pinsent Masons and formerly with the FCA, commented, “These figures demonstrate the clear need for a culture shift across financial services. Since the FCA announced new rules in 2015, we are yet to see much of a shift to an environment in which individuals feel confident to report bad behaviour. Instead, financial institutions are finding an increased interest from employees around their responsibilities and ownership with many escalating concerns internally on a defensive basis.”
The new FCA rules were introduced to encourage whistleblowing. In accordance with the rules, firms are required to assign responsibilities to a ‘whistleblowers’ champion’ to increase accountability and create a culture whereby individuals feel comfortable voicing their concerns or challenging poor practice and behaviour.
The deadline to comply with the FCA’s requirements is approaching and applicable firms are required to have mechanisms in place to allow their employees to raise concerns internally.
Ruck also commented that senior managers’ decisions are in danger of becoming based on personal interest and liberty rather than applying a risk based approach.
He added that to encourage an increase in whistleblowing reports, there is a clear need for whistleblowers’ champions to follow the approach outlined in order to avoid such a defensive practice which will only further worsen with the fast approaching implementation of new whistleblowing requirements.
How to Prepare for CySEC’s New Tiered LeverageGo to article >>
Second-Largest Whistleblower Award Ever
Over in the US, the Securities and Exchange Commission (SEC) last week awarded over $22 million to a whistleblower whose detailed tip and extensive assistance helped the watchdog put a stop to a well-hidden fraud at the company where he worked.
The award was the second-largest amount that the SEC has awarded a whistleblower. The largest, $30 million, was awarded in 2014.
Whistleblower programs are somewhat more established since the creation of the Dodd-Frank Act. The Commodity Futures Trading Commission (CFTC) program for example, receives tips about violations of its regulations and the Commodity Exchange Act.
Awards to Date
Back in May 2014, the US watchdog announced it was making a payment of approximately $240,000 to a whistleblower for information under the authority granted to it by the Dodd-Frank Act. It was the first award by the CFTC Whistleblower Program for which it reportedly collected between $800,000 and $2.4 million following the tip.
In September 2015, the CFTC made its second whistleblower award of $290,000. This was followed in April this year by a further award topping $10 million, making it the largest to date.
The reward is also the third largest to date in the short history of the SEC and CFTC programs following the creation of the Dodd-Frank Act.
More recently in July, the CTFC issued a fourth whistleblower bounty of $50,000 in for a tip which led to the opening of an investigation.
In all cases, the whistleblower’s name, the percentage of the penalty, and the subject matter of the tip remains confidential pursuant to the terms of the government program. Whistlblowers can, however, expect to receive a minimum reward percentage of 10 percent.
The CFTC has trailed the SEC program in both the number of tips and awards. A report on the SEC program be found here.