Does your whistleblowing policy provide for the fair treatment of those being accused? Are the senior managers who are responsible for investigating and dealing with concerns adequately trained? We are asking these questions because of a rise in whistleblowing cases during lockdown and, in particular, concerns raised not by employees within the firm but by members of the public. Of course, there is nothing wrong with that, concerns can be flagged by anyone, but if the allegations prove to be of little merit, or the whistleblower chooses not to cooperate with the investigation for whatever reason, then it becomes challenging as far as the investigation is concerned and stressful for the individual facing the allegations who is left trusting the process - after all their job may depend on it. This is, of course, a heavily regulated area and individuals' careers are on the line given that accusations against them could ultimately mean they're no longer deemed a 'fit and proper' person to carry out their role. So the stakes are very high.
The FCA's handbook has a chapter on whistleblowing which covers the training and development of all UK-based employees and should offer some reassurance to those individuals. It states firms 'must take steps to ensure fair treatment of any person accused of wrongdoing by a whistleblower'. However, in its review of whistleblowing arrangements at the end of 2018 in response to the recommendations of the Parliamentary Commission on Banking Standards, the FCA identified training as one of the main areas where firms needed to improve and, since then, the FCA has made it abundantly clear it expects regulated firms to develop, and roll out, detailed and bespoke whistleblowing training. This includes general training to all employees regarding standard whistleblowing procedure and also more detailed training and guidance for senior managers responsible for investigating and dealing with concerns. So the aim is to ensure that whistleblowing procedures in the FS sector are 'fit for purpose,' and that they function as intended, regardless of the source of the complaint. The trend we have seen during the lockdown is striking – a rise in whistleblowing cases generally but and increase in concerns raised by members of the public in particular. To understand why that might be, and how clients are responding, I spoke to Ben Brown who has been advising on this. He joined me by video link from Leeds:
Ben Brown: “Indeed, we’re seeing clients come to us with queries about how they deal with allegations brought by whistleblowers some of whom want to remain anonymous, some of whom aren't anonymous but might not necessarily be employees of the client or in any way involved in the in the conduct of the firm's business, so members of the public, and clients are coming to us asking us specifically how they deal with allegations of such a nature brought, perhaps, by people whom they don't know, or people who they know for a fact don't have any involvement in the conduct of their regulated activities and they are finding it quite hard to manage sometimes in terms of the level of disclosure that such a whistleblower might give to the firm to allow it to investigate allegations of misconduct, because of course, allegations of misconduct can be both financial and non-financial and it also doesn't necessarily need to be related to a regulated person's activities whilst in employment. It can relate to, perhaps, their integrity, their honesty or their reputation in a personal perspective as well because, arguably, that might, if certain allegations are proven, go towards their fitness and propriety to be regulated and to act in their role in the regulated financial services sector."
Joe Glavina: "So how can firms make sure that the interests of the person being accused are safeguarded in these situations, Ben?"
Ben Brown: "It's very important to ensure that you treat someone as innocent until proven guilty. There is a very difficult balancing act that our clients have in balancing the requirement to treat the whistleblower fairly and properly and to ensure that there is no detriment to the whistleblower and to ensure they are not victimised in any way and, indeed, that's a specific requirement that the FCA sets out in the handbook. But clearly we can't be treating people who are accused of misconduct, financial or non-financial, we can't treat them as guilty until the evidence has borne out that that allegation has been proven. So clearly investigations need to be conducted fully and properly, but I think it's very important to treat people with all due respect and to ensure that until the evidence allows you to make findings of potential guilt or, you know, the allegations proven are breaches of the conduct rules, for example integrity, it's important to ensure that the investigation is impartial and to not make snap conclusions one way or the other. So that applies equally to, immediately believing a whistleblower's allegations without evidence to do so before proper investigation is being conducted, but on the flip side of the coin, it's about ensuring that you don't just completely reject what a whistleblower has said without properly investigating it."
Joe Glavina: "What about cases where, as we have been finding, allegations are being made which appear to be unfounded and are, perhaps, motivated by some sort of a grievance from a previous employment, and that is the outcome of the investigation. What happens? Is there any way of going after that person?"
Ben Brown: "The most important thing and what I would tell my clients in these circumstances, and the question you asked me that is unique, really, because it's quite strange phenomenon that we're now seeing these personal motivations almost, that can come into this come into this sphere and into the workspace, because employers are putting it in an arguably difficult position whereby they need to ensure that the people who are conducting regulated activities within their business are properly certified to do so, so they are fit and proper to do so. But as I've said that, that means potentially judging their work conduct but conduct in a in a personal space as well, which can be very difficult. It's not really for the employer to determine what those improper motives might be, if indeed there are any, but if there is evidence that actually what has been alleged in terms of a breach of the conduct rules, for example, with integrity or honesty, if it's found that there's nothing to substantiate those allegations and therefore the only conclusion that can be drawn based on the evidence that's available is that there was an improper motive, that very much just needs to be at the forefront of the regulated business of the employer's investigation. My advice would be to focus more on the reporting of that outcome than it would be to necessarily chase down the person who's made those allegations originally because the employer has an obligation to make sure it investigates whistleblowing allegations, that is the number one priority, but also it has a duty of care to look after its employee. So it needs to make sure that that employee has been properly looked after and that the findings almost exonerate that person in situations where there has been an improper motive for raising it, whereas the FCA obviously very much discourages going after whistleblowers because it wants to encourage that. So unless there is a very, very serious case, in my view, of an improper motive and a malicious attempt to cast aspersions on someone's character, my advice would always be make sure you, number one, look after your own employee and, number two, ensure that you have followed the correct reporting requirements with the FCA."
We mentioned earlier the FCA's response to the recommendations of the Parliamentary Commission on Banking Standards at the end of 2018 and the way in which firms need to engage with the whistleblowing rules. Jon Fisher has written about this in some detail - highlighting the areas of improvement for FS firms. You can find that, and the latest developments, on the Outlaw website.