Whistleblowing in the financial services sector - does motive matter?

The type and level of protection afforded to whistleblowers varies widely across jurisdictions, as do the incentives offered for blowing the whistle. Headlines in the US point to life-changing payments being made by the SEC, CFTC, and IRS to whistleblowers. The EU Market Abuse Regulation (Article 32(4)) permits (but does not require) Member States to offer financial incentives to certain whistleblowers. It will be interesting to see if, over time, any Member States rely on this to offer incentives to whistleblowers – the UK has already considered and rejected the concept of offering financial incentives. Asian jurisdictions such as Hong Kong and Singapore have similarly eschewed a whistleblower “bounty”.

The availability or lack of rewards raises the obvious question of how relevant motive is (or should be) in a whistleblowing context. From a regulator’s perspective, if the ultimate goal is to identify and address problems before they escalate, the motive for an employee’s disclosure is unlikely to be relevant. It is noteworthy that the test for whistleblower protection under UK employment legislation refers to a public interest requirement, with potential damages being impacted by whether or not an individual has acted in good faith. Neither of these elements is a requirement of a “reportable concern” under the FCA handbook, suggesting that motive is not relevant. Reportable concerns include not just protected disclosures for the purpose of UK employment legislation but any breach of the firm’s policies and procedures and any behaviour that harms or is likely to harm the reputation or financial well-being of the firm.

Firms are required to notify the FCA if they have lost an employment tribunal claim brought by a whistleblower. This obligation applies regardless of the subject matter of the employee’s disclosure – a clear indication of the interest shown by the FCA in a firm’s attitude generally towards whistleblowing and its ability to handle appropriately any concerns that are raised (regardless of why they might have been raised). 

The employment law consequences of subjecting whistleblowers to detriment are generally well understood, but the reputational damage and regulatory scrutiny attached to any whistleblowing-related detriment claim mean that there is significant risk in treating whistleblowing only as an HR issue. It is also in a firm’s clear interest to handle whistleblowers well. Doing so can allow the firm to spot issues and remedy them whilst retaining control of the process - something which will be lost if the individual, feeling that the firm is not taking them seriously, goes to the regulator or the press with their complaint.  If that happens, the whistleblower’s motives are likely to be disregarded.