Whistleblowing & transparency (23/11)

Starting on 16 March 2020, I began writing daily blogs about the impact of the Covid crisis on financial regulation, and this has extended into commentary on regulation generally.

One of the early-FCA pieces of work in which I was involved was the discussion paper on Transparency (DP31/1) and the subsequent Feedback Statement (FS13/1). The DP and FS covered 9 main areas; whistleblowing was one, and last week the FCA published its latest set of quarterly data.

So, I thought it would be interesting to look at this in light of the ideas in the 2013 DP.

FCA WHISTLEBLOWING UPDATE

Interestingly, this information has apparently only been published since Q3 2021, and over the five quarters for which data is available the number of whistleblowing reports varied between 243-291.

It also contains graphs showing method of contact, whether the whistleblower opted to remain anonymous, and the top ten areas where allegations had been made. Here, some of the labelling is odd (e.g. mis-selling and pressure selling are separate from TCF), almost certainly driven by how specific the allegation is; complaints data often has the same characteristic.

It's all a good example of why such information is hard to interpret without proper context.

COMPARISON WITH DP/FS

Compared with the Update, the Feedback Statement (App 1) has much more to say greater on protection for whistleblowers and a longer list of potential information that could be published. This included:

? incidents by firm type and sector

? the type of issues raised

? the number of incidents that are found not to be an issue

? trends and themes

? whether whistleblowers used internal procedures before they contacted the FCA

? details of investigations

? overview of action taken/proposed, and

? evidence of improved consumer confidence.

The FCA committed to consider these, not to publishing them, but it's still notable that only the second suggestion is addressed by the updates.

Interestingly, the FCA update is still making much of the confidentiality constraints imposed by s348 of FSMA. And these are real, summarised in the DP (App 1). But the early FCA made commitments not to use it as a blanket shield against transparency which enabled it to resist a campaign by consumer organisations to persuade the Treasury to limit s348's scope.

Others will have better-informed views but I'm not sure the FCA's argument would be as strong today.

FINAL THOUGHT

Like many of its initiatives, Transparency will have been hindered by the FCA's frequent restructurings and shifting priorities. Until it has more stability, the regulator will continue to struggle implementing such long-term ideas.

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