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Regulatory Intelligence

FCA leaders must address "cultural problem" of poor treatment of whistleblowers,

say UK lawmakers Published 04-Jul-2019 byRachel Wolcott, Regulatory Intelligence The Financial Conduct Authority's (FCA) poor treatment of whistleblowers is a culture problem that must be addressed by its leadership, UK lawmakers said on Wednesday. The FCA has a terrible reputation for dealing with whistleblowers, they said.

"We need to improve how we deal with whistleblowers and the legislation around them. We must also insist that regulators, which already have access to sanctions, deal with these issues robustly. There is a cultural problem in the FCA in dealing with this.

That must be addressed, and it can only be dealt with by the leadership of the FCA," said Kevin Hollinrake MP (Con), during a backbench debate on whistle-blowing held yesterday."Culturally, the biggest issues in the regulator need fixing," he said. Several MPs raised specific concerns about the FCA's handling of whistleblowers' complaints. They highlighted instances where identities had been revealed inappropriately, complaints had been ignored and banks found to have mistreated whistleblowers were not sanctioned. MPs emphasized concerns that the FCA and other regulators were sometimes no better in fulfilling their responsibilities to whistleblowers than banks and other organisations. "In my experience, this not just about the organisations themselves but also about the regulator. The regulator could take a much firmer stance. Whistle-blowing is part of its processes. It has responsibilities under protected disclosure to deal with whistleblowers, but that is not what happens. It pays lip service to the issue of whistle-blowing. It says, "Yes, okay, we're dealing with that," but the cases that I will highlight illustrate that that is not what has happened. The FCA has got a terrible reputation in this area," Hollinrake said. MPs suggested the FCA should listen to whistleblowers as part of their supervisory and enforcement activities and use that intelligence to stop problems before they grew into a financial crisis, for example. "The FCA has a huge opportunity. It should regulate without fear or favour, but that is not where we are. It constantly looks over its shoulder at the banks and seeks to defend their reputation by concealing the truth, rather than robustly investigating these issues," Hollinrake said. FCA seen as an ally to banks

Norman Lamb MP (Lib Dem), who secured the debate, spoke about his constituent Mark Wright, a Royal Bank of Scotland whistleblower. Wright's case showed the FCA was too close to the banks it regulates, he said.

"[W]e have a regulator that is too close to the banks; that failed to protect Mr Wright’s disclosure or his identity; that, crucially appeared to fail to take the allegations about the misconduct of that bank seriously," said Lamb, who also questioned the role Andrew Bailey, FCA chief executive, played in Wright's case.

Jim Fitzgerald MP (Lab) said there was concern that when the FCA got involved in whistle-blowing cases it was seen to be an ally of the financial services, rather than an independent regulator, and the complaints processes were designed to stifle information that could lead to prosecution. "Staff at the FCA have told WhistleblowersUK that the FCA has a responsibility to ensure that there is not a run on a bank that might impact the UK economy. That would not be a problem if whistleblower intelligence were acted on," Fitzgerald said. Lack of action

MPs raised two cases they said illustrated the FCA's lack of action in whistleblowing situations. In one instance MPs questioned why the FCA did not take enforcement action against Lloyds Banking Group executives for mistreating a whistleblower. Hollinrake acknowledged Bailey met Lloyds whistleblower Sally Masterton and determined that she had been mistreated. Lloyds ultimately apologised and paid Masterton compensation. "[B]ut the FCA did not sanction anybody in Lloyds for that mistreatment. That is incredible. All the FCA keeps telling me is that there is another investigation going on [...] but that is unacceptable. The FCA has already established the mistreatment, yet it will not move forward to sanction the people responsible. Under the senior managers regime, these people, including the chief exec, could be sanctioned, fined or banned. That is exactly what should happen," Hollinrake said.Fitzpatrick questioned why the FCA did not follow up on whistleblower-provided information related to another Lloyds customer, his constituent, Julia Davey. Davey ran two interior decorating businesses she alleges Lloyds bankrupted.

Fitzpatrick said the FCA had failed to act on information from a whistleblower at Baronsmead, a turnaround company employed by Lloyds.

"I would also like to know why the FCA is not investigating the case as a genuine whistleblower complaint, eight months after receiving the information. The whistleblower has provided extensive evidence of the wrongdoing involved, but my constituent feels that the FCA has blocked her questions about an investigation and allowed the bank's cover-up to continue," Fitzpatrick said. Produced by Thomson Reuters Accelus Regulatory Intelligence



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