Data published by the U.S. Securities and Exchange Commission (SEC) and compiled by the whistleblower law firm Kohn, Kohn & Colapinto (KKC) reveals that the SEC has received more whistleblower tips from the United Kingdom than from any other foreign country. From 2011 through the 2021 fiscal year, the SEC received 5,044 whistleblower tips from individuals located outside the U.S. 699 of these tips came from the U.K.
Whistleblower advocates suggest that these statistics are indicative of the U.K.’s failure to properly protect and incentivize corporate whistleblowers. The SEC’s U.K. counterpart, the Financial Conduct Authority (FCA), has explicitly decided to not offer monetary awards to whistleblowers. Furthermore, the U.K.’s primary whistleblower protection law, the Public Interest Disclosure Act of 1998 (PIDA), is, according to whistleblower advocates, an outdated law which does not properly protect whistleblowers.
Given the shortcomings of the U.K.’s whistleblower system, whistleblower advocates say that it should not be surprising that so many U.K. whistleblowers make their disclosures to the SEC, which offers monetary awards and promises of anonymity.
“The FCA has a terrible record on whistleblowing. Whistleblowers should not trust the FCA, which has issued false and misleading reports on whistleblower laws in the past,” says whistleblower attorney Stephen M. Kohn of KKC. “Whistleblowers with information on publicly traded companies, foreign bribery, bank frauds, money laundering and tax evasion should contact the U.S. regulatory authorities, where their identity can be fully protected, and they can qualify for rewards,” continued Kohn, who is also the Chairman of the Board of Directors of the U.S.’ National Whistleblower Center (NWC). “The FCA must reverse its anti-whistleblower positions before they can be trusted.”
The FCA’s False Report and Lack of Rewards Program
Kohn references a report issued by the FCA in 2014 entitled “Financial Incentives for Whistleblowers.” Written after U.K. officials visited the U.S. and observed different whistleblower laws and programs, the report was meant to help determine whether or not the FCA would start offering monetary awards to whistleblowers. The FCA report claimed that U.S. whistleblower reward programs are largely ineffective and costly.
However, this FCA report has been widely criticized by whistleblower advocates as inaccurate and misleading. In 2018, NWC released a special report rebutting the FCA’s findings. According to NWC, the FCA report “is rife with inaccuracies” and “is premised on false and misleading information that distorts the crucial role of whistleblower rewards to ensuring that financial crimes are detected and prosecuted.”
The NWC report provides a bounty of evidence showing that whistleblower rewards programs are highly effective. For example, it points to the high percentage of False Claims Act cases that are directly triggered by whistleblower disclosures. It also quotes a number of officials from both the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) highlighting how important whistleblower rewards programs are to those agencies’ enforcement efforts.
Beyond providing evidence contrary to the claims of the FCA report, the NWC report also explains how the FCA report is based upon a “grossly negligent investigation.” NWC points out that during the FCA’s fact-finding visit to the U.S., it studied agencies which have no whistleblower program and thus have no authority as a source of information. For example, the FCA report claims that investigators “met the Office of the Comptroller of the Currency.” However, as NWC explains “the Comptroller of the Currency has no whistleblower program, no authority to pay any rewards, and does not oversee any criminal or civil investigations for which whistleblowers can obtain rewards from other agencies.”
Further issues with the FCA report that NWC pointed out include the lack of a literature review, as well as the failure to interview Senator Chuck Grassley (R-IA), a key figure in U.S. whistleblower legislation for decades and a supporter of whistleblower rewards programs. The NWC report additionally references a 2017 Bloomberg article which reveals that “after a meeting in which the SEC “eagerly laid out the program’s merits… [the FCA investigators were] invited to stick around for a week to observe it in action.” However, the investigators declined the offer and instead visited agencies with no rewards program.
The FCA has continually used this false and misleading report as justification for not offering rewards to whistleblowers. According to The Wall Street Journal, a spokeswoman for the FCA recently confirmed that the agency has no plans to offer rewards to whistleblowers. For many whistleblower advocates, the FCA’s disinterest in offering whistleblower rewards is contradictory to the agency’s posturing as a whistleblower-friendly organization.
The lack of a rewards program is a major difference between the FCA and the SEC. Whistleblower advocates argue that if the FCA is truly committed to working with whistleblowers, it should follow the SEC’s lead in rewarding deserving whistleblowers.
The discrepancy in the amount of whistleblower tips the FCA and SEC receive reflects the difference in incentives offered by the agencies. The Wall Street Journal reports that the FCA only received 1,073 disclosures in 2020, about 9% lower than the number of tips it received in 2019. In contrast, in the 2021 fiscal year the SEC’s highly successful whistleblower program received over 12,200 tips – one of several records set by the program that year.
PIDA Fails to Protect Whistleblowers
In addition to taking issue with the FCA’s lack of a rewards program, whistleblower advocates warn that the FCA relies on a faulty and weak law to protect whistleblowers. By promising whistleblowers they will be protected under this broken law, the FCA is threatening to endanger the very whistleblowers it claims to want to protect.
According to the FCA website, “[w]histleblowers are protected by the Public Interest Disclosure Act 1998 (PIDA), which means that you may obtain a remedy if you are hurt, suffer detriment or are dismissed because you have blown the whistle in the public interest.”
The problem is that PIDA is an outdated law which is shown to not adequately protect whistleblowers. In March 2020, European whistleblower rights expert Mark Worth wrote a piece for WNN explaining the results of an analysis of 115 PIDA cases done by the European Center for Whistleblower Rights. According to that analysis, only 17 percent of employees fired after reporting wrongdoing win their unfair dismissal cases.
“Contrary to the… promise in 1998 that PIDA would ‘protect you and your job,’ these case files expose a system in which the deck is firmed stacked against whistleblowers,” wrote Worth. “It is easy to understand why one victimized employee called the UK’s system a ‘dead-end labyrinth.’”
Furthermore, a 2016 report by the Thomson Reuters Foundation and Blueprint for Free Speech found that PIDA is “powerless to stop managers and co-workers from retaliating,” the law “can enable and even institutionalise retaliation,” whistleblowers “are often put on trial themselves,” and employers commonly “level trumped-up allegations against whistleblowers.”
Lastly, in July 2020, the All-Party Parliamentary Group for Whistleblowing, chaired by MP Mary Robinson, released the scathing report, “Making Whistleblowing Work for Society”. The report notes PIDA’s failures and states: “The Public Interest Disclosure Act 1998 has demonstrated fundamental inadequacies to the practical application of the legislation by failing to include a statutory responsibility to address the whistleblowing concerns or employers who retaliate.”
The SEC Can Protect and Reward UK Whistleblowers
Given the lack of a rewards program and the inadequacies of PIDA, the FCA can neither reward nor protect whistleblowers who make disclosures to the agency. The U.S.’ SEC, on the other hand, has a highly successful rewards program and offers whistleblowers protection under the strong anti-retaliation provisions of the Dodd-Frank Act. Whistleblower advocates like Kohn therefore urge individuals to blow the whistle to the SEC instead of the FCA.
Whistleblowers do not need to be U.S. citizens or residents in order to qualify for SEC whistleblower rewards and protections. Furthermore, neither the company nor the alleged violations need to be based in the United States for a violation to fall under the SEC’s purview. Any company publicly traded in the United States falls under the SEC’s jurisdiction.
According to the SEC, over 5,000 whistleblowers from 136 foreign countries filed claims in the United States between 2011 and 2021. The U.K. has consistently been a country from which the SEC receives a high number of whistleblower tips. Between 2011 and 2021, the SEC received 699 whistleblower tips from the U.K., the largest amount from any foreign country. In the 2021 fiscal year, individuals from the U.K. submitted 132 tips to the SEC making the U.K. the foreign country which provided the most whistleblower tips to the SEC over the course of the fiscal year.
Conclusions
For whistleblower advocates, the large number of whistleblowers from the U.K. choosing to submit tips to the SEC highlights the strength of the SEC Whistleblower Program and the shortcomings of the FCA.