It appears less and less likely that the UK will follow the lead of U.S. regulators and offer rewards to whistleblowers when their tips initiate an enforcement action. A government response issued this week by the Department for Business Innovation and Skills, which follows a solicitation of public comments last summer, recommends against creating a similar bounty program.
In the U.S., Congress provided financial regulators, in particular the Securities and Exchange Commission, with new tools to encourage whistleblowers to come forward. The SEC, for example, can pay whistleblowers 10 to 30 percent of settlements in excess of $1 million. The rewards are drawn from an Investor Protection Fund, established by Congress, which has a current balance of more than $450 million. Although feedback on similar financial incentives was sought in the UK's Call for Evidence, a caveat was included that “the government did not consider the evidence base strong enough to introduce this sort of system into the UK framework.” That view was reinforced by the majority of respondents.
Concerns flagged in the response included: unintended consequences, such as an increase in the number of disclosures made for personal gain; making people far more suspicious of whistleblowers; the potential for issues to remain unreported for longer they than they normally would, to ensure that a problem warrants a financial reward; that some employees may be more interested in policing their employer rather than working for them; and incentives could dilute the motivation of principled actions and introduce possible greed as a motive.
“The government does not believe financial incentives should be introduced as an integral part of the whistleblowing framework,” the response concluded.
The recommendations, although influential, may not be the final word on whistleblower incentives. The Financial Conduct Authority and Prudential Regulation Authority could go against this new guidance and create still reward programs of their own. The UK's Serious and Organized Crime Strategy also calls upon the government to consider rewards related to fraud and bribery prosecutions.
The Department for Business Innovation and Skills offered other suggestions for how the government can do a better job supporting whistleblowers. It recommended that future law consider expanding the categories of disclosures that may qualify for protection and reconsider who meets the definition of an “employee.” Those that do not automatically qualify for a legal remedy under the current whistleblowing framework include non-executive directors, auditors, self-employed individuals, students, trainees, contractors, interns, former employees, and external consultants.
Other recommendations included having officials issue improved guidance on such matters as how individuals can report, plugging gaps where employers do not have whistleblower policies, and clarifying the invalidity of gagging clauses. “The protections, as currently drafted, do not stipulate a business should have a process or guidance in place for dealing with whistleblowing,” the Department added. “We do not want to mandate this, but evidence suggests central guidance would assist business in creating policies for dealing with whistleblowing and help instill a consistent level of best practice across organisations. To support this, we will also create a model whistleblowing policy which can be adopted by business.”
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