UK FCA closes more whistleblowing investigations, makes fewer interventions for causing harm

Fewer investigations of protected disclosures are leading to the UK Financial Conduct Authority (FCA) intervening to prevent harm, according to the regulator’s own data, prompting one expert to express concern over the robustness of the regulator’s examinations.

Analysis by Compliance Corylated of a data set published by the FCA on November 22, shows that in the third quarter of 2024, 52% of whistleblowing reports closed out by the regulator led to supervisory or enforcement action being taken, down from 59% in both the first and second quarters of the year.

“The anxiety would be that if they are closing more investigations but taking less action, do we have the quality assurance that cases are being pursued as thoroughly as they can be?” said Francesca West, managing partner at James & West and a former chief executive of Protect, a charity that supports individuals making protected disclosures.

The regulator said it closed out 530 cases in Q3 2024. Of those, 28 (5%) led to it taking significant action, characterised as including enforcement action, a review by a skilled person under its Section 166 powers, or the restriction of a firm or individual’s permissions.

A further 251 reports (47%) had led to FCA supervisors taking action to reduce harm. This is defined as writing to visiting a firm; making an information request to a firm; or asking for an attestation that its regulatory rules are being complied with.

The figures for Q1 and Q2 are 4% (significant action) and 55% (supervisory action); and 7% (significant action) and 52% (supervisory action) respectively.

So far this year, the FCA has closed investigations into 1,165 whistleblowing reports while receiving 873 new protected disclosures. It has only included the data set on closed investigations in its quarterly update since the beginning of 2024, so an in-year comparison with previous years is not possible.

Register

It is difficult to match the action taken by the FCA, according to its whistleblowing update, with its published supervisory and enforcement actions. It has previously declined to identify instances where an investigation following a protected disclosure has resulted in an adverse entry on its Financial Services Register.

In a request made under the Freedom of Information Act 2000, the FCA was asked to identify instances when it had imposed restrictions as a result of a firm, or individual, mistreating a whistleblower. In response FoI10867, it said: “Because of the way the information we hold is organised, we are not able to identify the number of restrictions imposed on, or agreed with, firms and individuals in relation to the specific categories you refer to.

“This is because, whilst a preliminary search of our records based on the keywords ‘SYSC18’ and ‘Whistleblowing’ has identified over 900 potentially relevant instances, we would need to undertake a full review of the supervisory and enforcement records of each case to determine if they are within the scope of your request,” it added.

“We consider that the amount of analysis and reconciliation needed to provide you with the requested information would be tantamount to creating new information, which we are not required to do under FOIA.”

The regulator regularly tells consumers to check the register before interacting with financial firms and advisers. However, it is not possible to search the register by type of restriction, only by a firm’s or an individual’s name.

Pressure to speed up

The FCA has also come under pressure from lawmakers to reduce the length of time it takes to complete investigations into firms. Chief executive Nikhil Rathi told the House of Lords Financial Services Regulation Committee in November that the enforcement division had been working hard to achieve this.

Historically, it has taken the FCA an average of 42 months to complete an enforcement investigation but according to Rathi, investigations opened in 2023-24 were being completed in 16 months or less.  

FoI requests made over a number of years have identified multi-year delays in the FCA fully investigating reports from whistleblowers. In May 2024, it still had not fully investigated 832 whistleblowers reports 2023, according to information supplied in FoI11265.

Types of report, missing data

By category, compliance generated the largest number of protected disclosures (197), followed by fitness and propriety (122) and consumer detriment (119). Year-to-date, the compliance category has accrued the most reports, at 536.

Despite collecting data on the number of whistleblowers who first report their concerns internally to their employer, the FCA does not report it. The same is true for whistleblowers who say they have suffered detriment after raising concerns.

West said the data set on the volume of whistleblowers reporting they had suffered detriment would be very useful.

“When I worked at Protect, you could pretty much guarantee someone would have raised their concern internally before they ever thought about going anywhere else. Only the brave few went direct to the regulator. But generally, I would still say most individuals want to keep it internal,” she added.

The exception to first reporting internally is individuals who hold senior manager functions (SMF), West said. “Obviously, if they are SMFs one or two and they’ve got controlled functions, they know that they are in a very different position. I think that’s enabling in some ways, and they will go direct to the regulator.”

A key part of her job is to help clients navigate their reporting options. “The reality for our clients is they’ve got to be savvy from the beginning to understand where their options are before they rock the boat in a way that’s going to leave them out in the cold,” she said.

Well-advised and well-informed clients can quickly work out whether they should go down the internal route or go straight to the FCA if the former would harm them — or whether they just need to understand the consequences of either option so they can act on an informed basis, she added.