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Nic Cicutti: FCA whistleblowing comments like throwing petrol on an open flame

The regulator needs to sort out its own problems with whistleblowing before blaming advisers

FCA co-director of life insurance and financial advice supervision Debbie Gupta is a highly intelligent woman. Her nigh-on 10 years of academic study include a degree from the London School of Economics, an MA from the University of British Columbia and a DPhil from Oxford University.

In the 20 years since then, Gupta has held a number of high-flying civil service posts at the Home Office, as well as the Department for Work and Pensions. At least two of her roles, at Stonewall and at Nest, have involved external relations and public affairs.

She should know all about managing her words carefully. So I was particularly struck by her comments at the recent Money Marketing Interactive conference, in which she called for greater whistleblowing by advisers of rogue colleagues operating in their midst.

FCA: Advisers should be reporting bad practice

She told delegates at the event: “Poor practice damages us all, not just the individual who does it. The culture of calling out bad practice and of whistleblowing is not yet commonplace and advisers do not come to us when they see it is happening.”

Gupta’s experience will have told her that her remarks were likely to be viewed by many of those reading them as the act of someone throwing petrol on to an open flame.

All the more so as, according to the Money Marketing report, Gupta went on to describe the British Steel pensions scandal as a particular example where some advisers could have been more direct in their communication with the regulator regarding poor practice they had knowledge of.

If by that Gupta was referring to the lack of directness on the part of whistleblowers themselves, there will be many advisers left reeling at the way she appears to imply the responsibility for what happened at British Steel lay with themselves and not the complete failure of the regulatory process, of which she is now a part. Let’s be absolutely clear: Gupta is completely right to ask advisers to report examples of misselling and dubious practice on the part of their peers.

The time when it was acceptable, if it ever was, to operate by some form of Mafia-like code of omertà in respect of colleagues’ misdeeds is now long gone.

But at the same time, what is really striking is the way no responsibility whatsoever is placed on the FCA’s role in the mess.

In the aftermath of the Stafford Hospital scandal, in which appalling conditions and inadequacies during the early 2000s led to higher-than-average mortality rates for many years, the Francis Report recommended in 2013 that a new duty of candour be introduced within the NHS.

This requires every healthcare organisation and everyone working for them to be straightforward in all their dealings with patients and the public. Organisational and personal interests must never be allowed to outweigh the duty to be honest, open and truthful.

If a death or any other serious incident now occurs in the NHS, it is investigated.

The root causes are identified and any learnings from those findings are applied to help prevent the same things from happening again.

Crucially, the outcomes of any investigations are shared with families and coroners.

These reports often find their way into the media, where they form part of a greater transparency on the part of the health service.

Should advisers be reporting their own bad apples?

By way of contrast, there is no similar culture of openness and transparency at the FCA. The regulator seems to operate on the basis of 19th century Oxford scholar Benjamin Jowett’s famous dictum: “Never apologise, never explain. Get it over with and let them howl.”

It should not have been necessary, to give just one example from another Money Marketing article a couple of weeks ago, for the reporter to have had to make endless Freedom of Information Act requests in the latter part of 2018 to try to obtain information as to how the FCA responds to whistleblowers who report cases of malpractice to the regulator.

From personal experience, FOI requests are often made because press offices either do not respond to requests for information on the part of journalists or they simply reflect back the “don’t bother me” attitude of those who actually control access to the data. There is a need for structural change.

As Pimfa chief executive Liz Field observes in said Money Marketing article, there should be a website portal where regulated firms can easily report information. Trained staff should be on hand to take down details, rather than random call centre operatives who have no understanding of the subject area.

Most importantly, the FCA’s annual report should provide details of intelligence received and the types of action taken in respect of cases reported to it. There should also be full accounting of cases where action was not taken, why this happened and what steps are being made to address any systemic failures identified as a result of the inaction. While it is right financial advisers dob in their peers when there is a need to, it is equally right that the regulator accounts for the times when it failed to listen – and apologises for those failures. Openness and transparency work both ways.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Philip Castle 8th May 2019 at 8:02 pm

    Blimey Nic, no click bait in there as I think you’ll find most of us agree with 100% of what you have put in this article!

  2. derek bradley 9th May 2019 at 9:09 am

    We can learn a lot from history, sadly those in regulation try their very best not to.

    In 2011 Hector Sants was telling the TSC that he was not responsible for any failures of the organisation since 2007. He said that “the failures in the last decade, both conduct and prudential, come from a wide variety of sources” but vitally not from him.

    So while Sir Hector was claiming it was not his fault, Lord Adair Turner, once described by the Kelvin McKenzie ( once editor of The Sun) as “he of the ten-dollar haircut and the ten cent brain” arrives at the TSC telling them that making a regulator accountable would place a financial burden on the industry. By applying this logic for some reason I note he conveniently ignores the cost impact of badly formed, executed or reasoned regulation on the industry. Additionally he sees that by making those who regulate accountable for their mistakes would mean that they would be constrained in the judgments they may make and would not want to do the job.

    Why is it that those in an unelected position of power and authority fail to see that an element of responsibility should attach to that power? As Shaw observed, “those who have once been intoxicated with power, and have derived any kind of emolument from it, even though but for one year, can never willingly abandon it”

  3. Julian Stevens 9th May 2019 at 9:51 am

    The regulator routinely fails to listen to the feedback submitted in response to its “consultations”, preferring instead merely to claim to have “taken them on board”. The reality, of course, that its consultations are just going through the motions. There’s no genuinely constructive engagement with those whose opinions have been sought. And it’s much the same with the FCA’s exhortations for advisers to whistle blow on bad practice amongst their peers. Many contributors to this and other forums have written that they have in the past reported malpractice to the FCA only for it to have done nothing with or about it.

    If the FCA genuinely wants to engender confidence in its procedures for acting on whistle blows, it needs to draw up, publish and stick to them. If it can’t be bothered to do so, how can it expect the attitude of advisers to be anything other than Why should I bother if, like so much else, such reports simply disappear into a black hole, never to be heard of again?

  4. Spot on Nic, been there, done that. All to no avail

  5. Steven Farrall 9th May 2019 at 11:41 am

    Debbie Gupta is living proof of both ‘Dunning Kruger’ and Hayek’s insight and pithy comments on ‘pretence of knowledge’ displayed by all central planning bureaucrats. The world, especially the world of regulationism, is full of clever idiots.

  6. Regulatory Dogma in its purest form which means its rules, responsibility and thought process has Papal infallibility.

    Under this tarpaulin of protection even the fool has sanctuary.

  7. “If a death or any other serious incident now occurs in the NHS, it is investigated.

    The root causes are identified and any learnings from those findings are applied to help prevent the same things from happening again.”

    lol

    Gosport

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