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Interview: The role of regulators in protecting whistleblowers, with Mark Steward of the FCA

For World Whistleblowers Day 2022, on 23rd June 2022, our CEO Liz Gardiner spoke with Mark Steward of the Financial Conduct Authority about his view on the role of the regulator in protecting whistleblowers from victimisation and in challenging toxic cultures in the workplace.

Liz: What would you say the role of regulators is in preventing and deterring the victimisation of whistleblowers? 

Mark Steward: The vast majority of those who speak out are raising genuine concerns and are speaking up out of a real sense of public interest.  I think that’s a really important part of the whistleblowing experience that you have these very strong conscientious and inspiring people who bring their concerns forward both within the firms they work for, and then ultimately sometimes to us as the regulator, if they feel as though they’re not being listened to properly in their organisation.

I think what we’re able to do as a regulator is to provide that independent and objective assessment of what’s going on and where a whistleblower will be listened to.  We have set up systems and controls within the FCA to ensure that we are able to deal with whistleblowing concerns when they arise, with a specialised team who are trained in dealing with whistleblowers and who are able to pass on those concerns to the right part of the organisation.

We have also set rules, standards and obligations for the firms we regulate to deal with whistleblowers properly, to ensure that they’re not victimised and that their concerns are listened to. If whistleblowers are not listened to then those rules are broken and, as a regulator, we can take action against both those firms and against senior managers who don’t do the right thing by the whistleblowers. So, I think there’s a very important role that we play in supporting the whistleblowing function, and whistleblowers specifically, in relation to the concerns they have.

The tension here of course is that not every whistleblowing concern has a happy ending because not all of their concerns check out completely. But it’s important that we have a function that is able to objectively sit in the middle, and not be complicit in whatever might be going on within the firm nor complicit in holding back the whistleblower from those concerns being expressed. Our whistleblowing team is in place to ensure that we listen and we look into every whistleblowing concern that we get, and that’s an important channel for whistleblowers when they don’t feel they’re being listened to in their own organisations.

 

Liz: We find that lots of whistleblowers say they really appreciate feedback on the progress of investigations into their concerns. How does the feedback work at the FCA? 

Mark Steward: I completely agree that whistleblowers need to get feedback during the investigation. However, delivering this can be quite challenging because there are other rules that we have to follow which make it difficult for us to provide that information or at least the information that whistleblowers really want.  There are provisions in the legislation that apply to us that mean that we have to keep firm information confidential and that means keeping it confidential in our discussions with whistleblowers as well. We can say things like ‘we’re looking at what you’ve raised with us’ or ‘we’ve taken that up with the firm’ however we can’t really tell whistleblowers much more than ‘we’re acting on the information you’ve given us.’

We’ve looked at ways in which we can interpret the restrictions that are placed on us in a broader way so we can say more to the whistleblower but at the moment that’s not really possible. I think what I’d say about that problem is we’re trying to create as much transparency with whistleblowers as we possibly can whilst at the same time complying with the rules that apply to us.

I think the way in which whistleblowing in the financial services sector is handled is evolving, based on the experiences of whistleblowers. We are improving and amending our own processes so that we can do this better in the future. However, we will need a change in the law to be able to be fully transparent to whistleblowers because at the moment the law doesn’t permit it.

 

Liz: What is the role of the FCA when it comes to employment tribunals? Often when a whistleblower is going to tribunal, they will tick a box and say ‘yes, I want the regulator to be informed about this whistleblowing concern’. Does the FCA get invited to give opinions to employment tribunals? Is there a protocol around FCA being involved in this process? 

Mark Steward: Firms we regulate need to tell us when an employee or former employee takes the firm to the employment tribunal and there is a whistleblowing issue so we do know about it.

However, we don’t give opinions and we don’t get involved in the employment tribunal process which is entirely in the hands of the employment tribunal itself. The employment tribunal is the adjudicator not the FCA and I think sometimes it’s difficult for whistleblowers to understand that we’re not the arbiter here. We can’t impose our own judgment: that’s a matter for the employment tribunal to really decide.

Liz: So, I think you’re one of the regulators that has expressed a very clear interest in tackling toxic cultures and workplaces. What is the approach of the FCA to trying to improve whistleblowing culture? 

Mark Steward: Culture’s a very important part of the compliance obligation across all the rules that we set, including the rules that we set in relation to whistleblowing. It is vital that good whistleblowing culture is set from the top and tone from the top needs to generate tone from the middle and tone from the middle needs to generate tone from below, all of which is consistent.

We really want to see a very strong coalition between whistleblowers and senior management in firms because both groups have the firm’s best interests at heart. The whistleblower has concerns about what is happening within a firm that is not right and senior management should be absolutely committed to ensuring that what’s not right is looked at and fixed. So really that should create a very powerful cultural alliance between whistleblowers and senior management.

We’ve tried to capture that in the rules that we’ve set for firms which require large firms to have what we call a Whistleblower Champion. The champion is usually a member of the senior management team of the firm who has the obligation to ensure that the firm is properly bringing integrity, independence and effectiveness to its systems and controls around whistleblowing. These whistleblower champions should send out a cultural message within the firm that senior management really prizes whistleblowing and takes it seriously.

Where a strong cultural message is set from the top it has a very beneficial effect on the whole organisation.  Of course, we want to make sure that this is always the case and we’re a backstop for ensuring that whistleblowers are listened to and not victimised and where there are failures we will investigate and we’ll take action against the firm. I think culture is absolutely core here and the message from us is senior management and whistleblowers should be on the same side even if they disagree about the merits of a particular concern.

 

Liz:  Before we finish would you want offer some final thoughts from the regulator’s perspective firstly about what the role of the regulator is in improving whistleblowing and secondly in general how we improve the whistleblowing system in this country? Is it about adopting rewards for whistleblowers as many have been suggesting recently? 

Mark Steward: Let me deal with the first part of your question firstly. I certainly think that it’s important that we have a clear transparent system for managing the concerns that whistleblowers have got and that that system includes the role of a regulator who can independently assess and act in relation to whistleblowers concerns including acting against firms and individuals where there is clear evidence the whistleblower has been victimized because of their whistleblowing.

I think it’s only through mechanisms like that, that we create the right kind of culture for whistleblowing to exist as part and parcel of a normal way of working and to ensure that whistleblowers have the right respect and status within firms as well.

On your second question and the issue of rewards and incentives. The FCA doesn’t have a formal view. However, I certainly have a personal view about it and that I have a concern around the way in which a reward system encourages law enforcement agencies and regulators to focus on what might be called the high-end whistleblowing and ignore what might be called the more ordinary whistleblowing that we receive.

We get about a thousand whistleblowers every year, most of those issues are concerning relatively technical or minor issues within a firm that might become big if they’re not addressed properly. The real value of our approach to whistleblowing from a regulatory perspective is that allows things to be nipped in the bud before they can become more harmful.  I don’t think that’s at the expense of more scandalous disclosure that might be made.  But it is about ensuring all whistleblowers are listened to not just those whose claims produce headlines and big enforcement cases.

I think a reward system encourages regulators and law enforcement to sort of pick and choose the high-end whistle-blowing complaints they then take forward and look at.

I think that’s what we’ve seen in those jurisdictions where rewards are paid to whistleblowers. The vast majority of people who blow the whistle to regulators in those jurisdictions actually don’t get their concerns looked at, at all because the process is all about finding the valuable ones not all of them.

So, I think the approach we take here is a really important one because it means every whistleblower gets listened to, every whistleblowing concern gets looked at on its merits and more often than not those concerns allow us as a regulator to nip harm in the bud which is exactly why the whistleblower wants their concerns looked at in the first place.

 This interview was adapted from our World Whistleblower Day Webinar on 23 June. You can view the full video here.  

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