Blowing the whistle to the FCA – the regulator's assessment of its processes for handling reports yields "disappointing" results

On 4 May 2023, the FCA published a report setting out the findings of its own qualitative assessment in relation to its handling whistleblowers who directly report to the FCA.

The FCA selected a sample of 68 whistleblowers who had engaged with different FCA Whistleblowing team members and received 21 responses. We note that in contrast, between April 2021 and March 2022, the FCA received and assessed 1,041 whistleblower reports with 2,114 separate allegations. Why such a small sample?

The FCA's findings

Amongst the FCA's questions, they asked respondents why they decided to contact the FCA’s Whistleblowing team. The number one reason for reporting to the FCA was that an internal complaint had already been made but which was ignored (13 of 21 respondents), closely followed by the reporter being a former worker of a firm who could not use another channel. The findings suggest that respondents came to the FCA as a "listener of last resort", where they did not feel they could raise their concerns at work or that their firm had addressed their concerns.

More concerning from the FCA's own perspective were the respondents' degree of satisfaction with the FCA Whistleblowing team. The FCA asked:

Were the respondents listened to? Some 15 of 21 were "Extremely or somewhat dissatisfied". Only 4 were "Extremely or somewhat satisfied".
Were the issues in their report explored? Once again, some 15 of 21 were "Extremely or somewhat dissatisfied" and only 4 were" Extremely or somewhat satisfied".

Some dissatisfied respondents suggested that: (i) they did not feel that there had been enough dialogue with them to ensure that their concerns had been understood; and/or (ii) they perceived that the FCA were reluctant to act.

On a more positive note, in relation to the FCA's explanations as to what they could offer whistleblowers, the findings suggested respondents:

were satisfied with the FCA's initial communication;
believed that they understood the role of the Whistleblowing team and how they would progress the whistleblowing report; and
understood the FCA would keep their identity confidential.

However, when it came to keeping whistleblowers updated, 10 respondents found the FCA responses "Not at all reassuring"; only 2 found it "Very reassuring". 4 respondents could not really say if they were reassuring or not.

Respondents indicated that the updates "lacked substance", "no real information was given" and "didn’t say if the FCA was investigating or not".

In relation to whether final outcomes of the review met expectations, 8 of the 9 respondents who had received final feedback were dissatisfied with the outcome they had received, and 12 had not yet received final feedback.

Respondents reported that they were not reassured that their concerns had been properly investigated; they had expected a final report detailing action taken. Some respondents felt that their concerns had been "brushed aside", there was "no explanation, no opportunity to discuss" and that they felt there was a "failure to investigate properly and take appropriate actions". Further, there were "no real consequences" for wrongdoers. Others said that the review "was taking ages to conclude".

On this last point, we would note that earlier FCA data in its 2021/22 Annual Report indicated that of the 1,041 whistleblower reports received and assessed between April 2021 and March 2022, 801 cases still remained under assessment.

Finally, in terms of overall satisfaction with the FCA’s handling of their whistleblowing report, there was significant dissatisfaction with their experience of whistleblowing to the FCA; 15 respondents were "Extremely or somewhat dissatisfied", 4 were "Neither satisfied nor dissatisfied", and only 2 were "Extremely or somewhat satisfied".

In response to these findings, the FCA say they will now:

provide whistleblowers with more detail on what has been done with the information provided, or reasons for taking or not taking action;
improve the use of whistleblowers’ information across the FCA (e.g., making the best use of data and ensuring that end-to-end whistleblowing processes are as efficient as possible);
enhance its "webform" – which was the most popular way for whistleblowers to contact the FCA – to fully capture every whistleblower’s disclosure; and
engage with the Department for Business and Trade to support a review of whistleblower legislation to enhance the wider whistleblowing system.

Commentary

The FCA's findings must clearly concern them – they admit they are "disappointed to see the dissatisfaction expressed". If regulated firms were to present similar findings in relation to their own handling of whistleblowing reports, no doubt the FCA would take a very dim view. The proposed steps may well help to address some of the points but we would suggest that addressing the backlog of unresolved reports is also key.

In addition, for regulated firms themselves, some of the FCA's findings may be equally relevant – clear, up-front explanations of the process that will be followed and its intended goal, speed of resolution of concerns, providing regular and meaningful feedback, and taking meaningful action against identified misconduct are all critical in providing an effective whistleblowing process.

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