An Analysis of the Whistleblowing Frameworks of United Kingdom Financial Services Firms.

Abstract

The Financial Services industry is one of the most regulated industries in the world, and most often, highly regulated industries are cited as the sectors with the highest whistleblowing report rates. In 2016, a change occurred in the United Kingdom’s (“UK”) financial services sector around whistleblowing, with the introduction of rules requiring firms to implement policies, procedures and mechanisms which fulfil the firm’s responsibilities and obligations in relation to whistleblowing. This provides a natural experiment to allow us to answer the question of whether this change made a meaningful impact on whistleblowing. Existing research in this field indicates that whistleblowing policies at the corporate level are far more effective on whistleblowing behavior than whistleblowing legislation and regulation. Following the introduction of the 2016 rules, the UK financial services regulator noted a decline in the number of whistleblowing reports it received in the ensuing years. This decline resulted in a corresponding increase in the number of reports received by financial services firms through their whistleblowing channels. As such, this increase can most likely be attributed to the introduction of the 2016 rules and appears to indicate that the rules are fulfilling their purpose, namely, encouraging more internal reports from whistleblowers. This thesis analyzes and compares the whistleblowing programs of a number of regulated UK financial services firms with the aim of understanding the impact of the 2016 rules on the firms’ whistleblowing arrangements and to understand how the firms’ implementation of the rules through corporate policies and reporting mechanisms in the financial services sector vary in practice. Further, this study also explores whether specific economic or other characteristics of the UK financial services firms influence their whistleblowing arrangements and whether the variations in these arrangements have any impact on litigation and regulatory enforcement action against the firms. The results ultimately suggest that larger and older UK financial services firms tend to have more comprehensive and publicly accessible whistleblowing frameworks.