Banking StandardsWritten evidence from the Financial Services Authority

WHISTLEBLOWING

1. This memorandum addresses the Parliamentary Commission on Banking Standards further questions arising from our submission on 11 December. This includes:

possible information we could provide to employment tribunals to support whistleblowers; and

the FSA’s approach to the guidance in our Handbook on disclosures covered by the Public Interest Disclosure Act, and in particular, SYSC 18.2.3 G.

Information to Employment Tribunals

2. The FSA’s whistleblower unit seeks to offer impartial guidance and support to whistleblowers concerned at the consequences of making a disclosure. This will include advising them of the existence of organisations such as Public Concern at Work which may be able to provide them with advice and assistance. Our procedures are designed to prevent the whistleblower’s identity being known beyond the FSA’s whistleblowing unit without their permission. However, there is a risk that the whistleblower may nonetheless be identified by their employer, and could suffer disadvantage as a result. In the event this led to an employment tribunal, a whistleblower may ask us to provide evidence in their support.

3. We receive infrequent requests to appear before employment tribunals, which we consider on a case-by-case basis. The factors we take into account include the impact of the confidentiality constraints in the Financial Services and Markets Act 2000 (FSMA) on what we can disclose. We also consider the contribution the information we are able to disclose would be likely to make to the fair disposal of the case. Depending on the timing of the employment tribunal, there may be little scope for us to provide an analysis of the validity of the whistleblower’s concerns to the tribunal. This is because of the confidentiality restrictions on what information we could share with the tribunal on the steps we took following their disclosure, and the outcome of these measures. There are situations where we would have greater freedom to comment on the whistleblower’s submission. For example, where enforcement action has been taken following the whistleblower’s submission, and we have put the facts of that case into the public domain in a formal Final Notice, we may have more flexibility about describing the role of the whistleblower. The problem here is one of timing—the published outcome of the enforcement action may happen too late to be included in a tribunal case.

4. The FSA is also provided advance notification by HM Courts and Tribunal Service of cases when a protected disclosure under the Employment Rights Act 1996 has been made and where the claimant has given their consent for it to be sent to the relevant regulator. We review these tribunal notices relating to whistleblowers and will consider whether there is scope within the confidentiality restrictions imposed by FSMA to provide evidence to the tribunal.

5. Broader material about the support we offer to whistleblowers can be found in our previous submission dated 8 February to the Commission.

FSA Rules About Whistleblowing

6. The FSA’s Senior Management Arrangements, Systems and Controls (SYSC) Sourcebook provides guidance on the FSA’s approach to disclosures covered by the Public Interest Disclosure Act.1

7. We would take seriously the suggestion that an FSA-regulated firm breached the requirements of the Public Interest Disclosure Act by penalising a member of staff who had made a protected disclosure.

8. We believe the best method for us to learn of such breaches is to rely on whistleblowers who made disclosures to us to draw our attention to any detriment they believe they have suffered as a consequence. Employment tribunals do sometimes make us aware that a firm we regulate is contesting a claim. We do not believe that active monitoring of the judgements of employment tribunals would be a cost-effective means of us discovering misconduct by the firms we regulate because thousands of tribunals take place every week: according to Ministry of Justice statistics,2 employment tribunals accepted 186,300 claims in 2011–12, for example.

9. There have been cases where whistleblowers have informed us that they believe their employer acted in a manner that led to the whistleblower suffering detriment as a consequence of making a protected disclosure.

10. After a whistleblower has contacted us alleging mistreatment by their employer, our procedure is for the whistleblowing unit to inform the supervisory staff responsible for managing the FSA’s relationship with that firm and discuss the case with them. Internal legal advice may also be sought at this stage. The supervisory staff would consider what action would be appropriate: Enforcement action would be one option, as would other measures such as requiring remedial measures to be taken by the firm.

11. To date, we have not undertaken detailed investigatory work or enforcement action against firms we regulate as a consequence of receiving accusations they mistreated a whistleblower.

12. We will continue to monitor and keep under review the Financial Conduct Authority’s approach to whistleblowing, and implement any changes that will improve the regime, as appropriate.

19 March 2013

1 SYSC 18.2.3 G – “The FSA would regard as a serious matter any evidence that a firm had acted to the detriment of a worker because he had made a protected disclosure (see SYSC 18.2.1G (2)) about matters which are relevant to the functions of the FSA. Such evidence could call into question the fitness and propriety of the firm or relevant members of its staff, and could therefore, if relevant, affect the firm’s continuing satisfaction of threshold condition 5 (Suitability) or, for an approved person, his status as such.”

2 See: http://www.justice.gov.uk/statistics/tribunals/employment-tribunal-and-eat-statistics-gb

Prepared 19th June 2013