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FCA fails to track whistleblowing reports

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The Financial Conduct Authority has admitted it does not track whether further regulatory action is taken when whistleblowing reports are handed over to other internal departments.

A freedom of information request, submitted by Money Marketing, reveals the FSA’s whistleblowing team received 4,063 tip-offs between 1 April 2012 and 31 March 2013, up 13 per cent from 3,600 the previous year.

When asked to provide the number of whistleblowing reports received in 2012/13 that resulted in enforcement action, the regulator was unable to do so.

The FoI reveals the FSA did not record what happened in the 15 per cent of the whistleblowing reports it received in 2012/13, which were passed to other FSA departments. The regulator adds the cost of now finding out whether regulatory action was taken in these cases would exceed the £450 limit to comply with an FoI request.

The FCA first pledged to strengthen its use of market intelligence from the industry last August. FCA chief executive Martin Wheatley has stressed he wants to work closer with the industry to spot potential problems, saying in March the regulator will be “much more sensitive to information about financial products and the way they are being sold”.

The FCA also consulted earlier this year on giving whistleblowers more information and providing the industry with an overview of the type of action taken, as part of plans for greater regulatory transparency.

An FCA spokesman says: “Whistleblowing is a valuable source of information and we take each allegation extremely seriously. We are in the process of updating our systems so we can check the final outcome of a whistleblower report quicker than before.”

Lansons director of regulatory consulting Richard Hobbs says: “Surely a regulator should have the management information to show how effective whistleblowing is.

“The regulator seems to believe whistleblowing is a regulatory tool worth improving. But how does it know if it has not got the data? There is a gap in its logic there.”

Apfa policy director Chris Hannant says: “There is nothing worse than trying to encourage people to come forward if the information is just going to disappear into a black hole. It is important for the regulator to demonstrate what it has done with reports to show whistleblowing is worthwhile.”

Hudson Green & Associates principal Ian Hudson says: “Treating customers fairly is all about measuring successful outcomes and the same principles should apply to the regulator.”

Editor’s view: The FCA’s astonishing lack of MI on whistleblowing

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. A whistle blowing policy should be the cornerstone of the regulator with strict procesdues and timescales. It is no surprise to the many IFA’s that the Berty Big Boots regulator is so far removed from reality in their Ivory tower that they do not take whistle blowing seriously.
    I would wager that EVERY area of issue that the FSA missed that has cost the country and consumers BIllions had been flagged up to the regulator.
    Beggars belief, but totally expected

  2. Personally I don’t agree with this whole whistleblowing concept, and I certainly wouldn’t want the FCA putting more resource and cost to it (the bloody cost of the FCA is enough already). Most of the time (from what I can gather) they get a lot of calls from people just harbouring a grudge ?

    I short the FCA should just do their job ! make sure the people giving advice are registered to do so and more importantly make sure the products that are regulated are sound, and make sure people/consumers are fully aware that un-regulated products are un-regulated for a very good reason.

  3. Donald Fraser 30th May 2013 at 9:21 am

    I notified the FSA whistle-blowing department earlier in the year about an “easy pension review” website. The site, which doesn’t display any regulatory information about the firm (doesn’t appear on the FCA register anyway) pretty much purports to offer pension review advice which I thought was RDR activity. The website is still very much live … I just hope it is not attracting unwitting customers because their regulator wouldn’t appear to be looking out for them despite being advised.

  4. In my IFA firm the ‘whilstle blowing’ contact is the MD’s wife. As if !!!!!

  5. Martin Wheatley needs to rectify the incompetent mishandling of market intelligence by the FSA before we can all move on.

    For example, there is strong evidence to suggest that many people informed the FSA about concerns relating to CF Arch cru, yet the FSA did nothing.

    Clearly, the regulator’s failure to act contributed to consumer detriment. If whistleblowing and intelligence gathering is to improve, then the new regulator has to face up to the failings of the past and hold those individuals responsible to account.

  6. Julian Stevens 30th May 2013 at 10:05 am

    Tracking and reporting back to the notifier the outcome of his report seems to me to be a very simple and basic procedure. How can it possibly cost more than £450 per case?

    The regulator receives the report, allocates it to the appropriate department to investigate and requests a report back on the outcome of the investigation, of which it then duly advises the notifier. If nothing else, aren’t notifiers reasonably entitled to expect such a simple courtesy? If the regulator can’t be bothered to set up and operate such a system, why should anyone out here bother to report apparently dodgy practices? Quid pro quo and all that.

    If only to formulate some sense of perspective, perhaps the regulator should consider just how much it costs firms to collate and submit the excessive quantities of data ~ much of it of dubious value ~ it forces them to submit every six months by way of its GABRIEL returns. Many firms have reported that it takes them at least a day to do each submission and that the system via which they have to do it is badly designed, unnecessarily complicated and that many of the regulator’s own staff don’t seem to know how to get through it.

    The regulator seems still to be stuck in the same old one way rut of Do as we say, not as we do. What was it that Martin Wheatley said about the FCA wanting to engage more contructively with the industry? Actions speak louder than words.

  7. The FCA needs, as a matter of urgency, to wade into the murky waters of “marketing” websites. These non regulated siren calls to the financially naive are a menace – particularly where pension transfers are concerned. Feeding off them are a host of parasitic firms who seek only to remove chunks of commission via ex-only SIPP transfers.

    This was exactly the model which enabled the Harlequin fiasco – and that was whistle blown for years.

  8. What kind of response do you expect from an organisation where responsibility for actions, or lack of, is an unknown thing.

  9. To be fair to the FSA/FCA, dealing with whistle-blowing information is not easy. As stated earlier there are more than a few reports that are malicious or mischievous and simply the result of a disaffected employee. Sorting this chaff from the very few valuable reports is not easy and a thankless task.

    In the past, as a firm’s compliance officer, I have been contacted by the FSA about allegations made by a whistle-blower. After an open and honest discussion it was agreed that it was mischievous. Case closed. How many are investigated I don’t know but clearly at least one has been…

    The problem with marketing websites is as much to do with the law/rules as it is the websites. Many are clearly dubious but don’t break the law or the rules. You don’t have to be authorised to give generic advice. Advice is only regulated advice when it leads to the recommendation of a specific regulated product. MAS, for example, gives ‘advice’ but it’s not ‘regulated’ advice…

  10. Adding feedback loops and detailing and maintaining reports purely for the sake of MI in case another FOI comes in appears to me to be a waste of time and money.

    We seem to complain that the regulator costs too much with one breath then complain they should be doing more and more costly activities with the other!

  11. I brought this to the attention of money marketing and spent some time researching the subject, unfortunately they chose not to publish my original article which is a real shame because it had a lot more information than the article above.

    You may ask the reasons why I researched this – well I believe protecting one’s trade is very important and all IFA’s should take more interest in it, if we are to survive as businesses. After all if you’re a gas engineer you really don’t want to be competing against unauthorised gas engineers and end up paying for their mistakes.

    In my freedom of information request I actually obtained the figures the 2012 and they are as follows:

    The Unauthorised Business Department received approximately 6000 reports in 2012 of which approximately 750 cases referred for further investigations. That’s only 12 ½%, the UBD were unable to give specific details on how many of these cases resulted in prosecutions because it would exceed the 10 hour limits.

    Now I don’t know about you but giving approximate figures is always a worry as it gives the impression that the figure was just simply made up and not being able to give an accurate figure on how many prosecutions surely shows a department that is not run efficiently.

    The FCA’s main statutory objective is to protect the consumer’s but how can they protect the consumer when it treats whistle blowing reports with no regard. Over the last few years I’ve read comments about regulator from different individuals in the common theme is that we need to hold our regulator to account as nobody seems to be asking the right questions.

    If our regulator has a statutory objective to protect consumers and surely there are simple stats that the regulator can publish on a regular basis demonstrating that they are meeting this objective. Because when I go online and do a simple search for financial advice it is clear that they are not meeting this objective. All scams and frauds start somewhere primarily online and you will thought that this Department would have the re-sources to check basic authorisation, after all the FCA has a budget of 456 million that the UBD only has 38 staff. Yes you did read right 38 and I suspect most of them are unqualified.

    Surely that’s what the FSMA 2000 and 2012 is all about checking who is authorised to give financial advice.

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