The UK’s top financial regulators have recommended that parliament not create a program to reward whistleblowers in the style of the SEC, saying it would cost too much, undermine companies’ in-house whistleblower programs and probably wouldn’t work anyway.
Offering financial rewards to people who report wrongdoing at their companies might also encourage malicious reporting, prompt employees to entrap others into breaking the law so they could collect rewards, and give money to people ‘for performing what is arguably their regulatory duty,’ say the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA).
‘Introducing financial incentives for whistleblowers would be unlikely to increase the number or quality of the disclosures we receive from them,’ the regulators say in a joint letter to the Parliamentary Commission on Banking Standards, which is considering creating a program similar to that in the US to encourage people to report illegal activity within their companies.
‘Financial incentives might lead to more approaches from opportunists and uninformed parties passing on speculative rumors or public information,’ the letter continues. ‘Introducing incentives has been accompanied by a complex, and therefore costly, governance structure’.
The regulators say rewards for whistleblowers could damage their credibility in court by calling their motives into question and state that ‘handing over large sums, perhaps in the millions, would be a substantial shift in UK policy norms, which are very different from those in the US.’
As an alternative to financial rewards, the FCA says it will use ‘new management techniques’ to determine which sectors provide fewer whistleblower tip-offs than might be expected from their sector and then develop outreach programs targeting potential whistleblowers in those sectors.
The regulators also say they will publish later this year a series of proposals that aim ‘to ensure the culture at companies is one where people are prepared to speak up, as part of improving behavior throughout the firm.’
