Government agencies may expand investigation, believing that strong protections for whistleblowers mitigate the impact of financial scandals.

Author: Bill Hinchberger

The unprecedented move by the board of Barclays to publicly reprimand and slash the bonus of chief executive Jes Staley for trying to uncover the identity of a whistleblower represents the opening salvo in a months-long regulatory process that could have broader implications for the UK financial-services industry.

UK financial regulators—the Financial Conduct Authority (FCA) and the Prudential Regulation Authority—have launched an investigation into Staley’s conduct. The FCA`s new Senior Managers and Certification Regime, which came into effect in March 2016, attempts to protect whistleblowers from retaliation, in part by requiring financial institutions to appoint a senior manager as the “whistleblowers’ champion.”

Regulators believe that whistleblowers can provide early intelligence to mitigate the effects of scandals in the financial system, explains Arpita Dutt, a partner at London law firm Brahams Dutt Badrick French.

The FCA may want to “fire a shot across the bow,” not only to Barclays, but to the entire industry, says Owen Watkins, a lawyer with Lewis Silkin in London and a former regulator at Britain’s Financial Services Authority, which was replaced by the FCA in 2013. Watkins says the FCA “may want to broaden the scope” of the investigation to determine whether Staley is a “rogue elephant” or just another “alpha male used to getting his own way.”

Regulators must also remain cognizant of how the public perceives their handling of the Barclays case, notes William Granger from London law firm Charles Russell Speechlys. “It is not just about punishment,” says Granger, “but about creating a cultural change.”

The incident has reopened debate about the role of whistleblowers and written and unwritten rules governing issues such as anonymity, confidentiality, specious claims, procedures designed to limit the intervention of top executives, and individual executive responsibility and liability. The bounty approach often used effectively in the United States, whereby whistleblowers go public because they stand to gain financially, has not been adopted in the UK. But the question of whether to institute such a regime is likely to resurface, Granger predicts.

In the short term, most observers agree that the Barclays revelations will probably put a damper on whistleblowing. “Confidentiality is so important,” says Dutt. “Fear of retaliation [can] become a deterrent.” As Watkins puts it, “If you are a [potential whistleblower] in Barclays, you are not as confident as you were less than a year ago.”

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