FCA response on treatment of whistle-blowers and SME Alliance

• Letter from Tracey McDermott, former Acting Chief Executive of the FCA, dated 26 May 2016
• Inquiry: Financial Conduct Authority
• Treasury Committee

Chair's comments

Commenting on the correspondence, Mr Tyrie said:

"The FCA was not clear whether it would treat the SME Alliance as whistle-blowers. In his evidence to the Committee last month, Andrew Bailey seems to appear to agree.

The regulator needs to grasp what's needed to create an appropriate environment for whistle-blowers. Mr Bailey's appointment is an opportunity further to implement the recommendations of the Parliamentary Commission on Banking Standards, designed to ensure that whistleblowing will play a role in improving conduct in financial institutions."

Background

• SME Alliance is a small, not for profit organisation set up to support SMEs and, in particular, SMEs which have had or are having problems with banks. Its main goal is not to deal with individual cases but to communicate with regulators, authorities and relevant organisations on the collective issues of its members.
• On 18 January 2016, representatives of SME Alliance wrote to the Chairman to express concerns that the FCA had betrayed the confidence of whistle-blowers by passing on sensitive information to the subject of their complaints, the high street banks.
• On 9 February 2016, the Chairman wrote to Tracey McDermott for her response to claims made by the SME Alliance that its representatives have been 'badly compromised' by the passing on of sensitive information to the banks. Mr Tyrie also asked what progress that FCA has made towards implementing the Parliamentary Commission on Banking Standards' recommendation that the FCA encourage a ‘significant shift in cultural attitudes towards whistle-blowing'. This letter is attached.
• On 10 March 2016, Ms McDermott responded. In the letter, Ms McDermott confirmed that the FCA did not treat the SME Alliance as a whistle-blower and subsequently disclosed some of its information on individual customers with the banks accused of falsifying their records. Her reasons for doing so rest on the SME Alliance not having asked the FCA not to share its information with the bank.
• It is not clear from Ms McDermott's letter whether the FCA raised the issue of confidentiality with the SME Alliance when first approached or clarified that it would not be treated as a whistle-blower. This letter is attached.
• On 13 May 2016, Mr Tyrie wrote again to Ms McDermott for further clarity about what measures the regulator is putting in place to improve its treatment of whistle-blowers.
• On 20 Jul 2016, Andrew Bailey commented on this subject in a pre-appointment hearing with the Committee:

Chair: Then there is the SME Alliance issue about treatment as whistle-blowers. It is difficult to get to the bottom of that one, but it does not look very good on the basis of the information that we have.

Andrew Bailey: I know that you and Tracey have exchanged letters on a number of occasions. The moral of the story was that, when that sort of thing happens, you have to be very clear and upfront with people and say "Are we in whistle-blowing or are we not in whistle-blowing?"

Chair: That clearly did not happen.

Andrew Bailey: No, because unfortunately both sides had a slightly different interpretation ex post.

Further information

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