The Dodd-Frank bill introduced in the U.S. in 2010 included a batch of provisions designed to help protect whistleblowers, which has indeed succeeded in improving the situation for them, says Erika Kelton, an attorney at legal firm Phillips & Cohen.
“In the U.S., financial whistleblowers are coming forward in greater numbers because of the confidentiality, employment protection and, in particular, financial rewards that the Dodd-Frank Act provides them,” Kelton told CNBC via email on Tuesday.
However, the situation is less encouraging in the U.K., says the attorney who has helped clients secure three Securities & Exchange Commission (SEC) whistleblower awards during her career and who recently relocated from Washington D.C. to London.
“In the U.K., the number of whistleblowers who have reported wrongdoing to the Financial Conduct Authority (FCA) has dropped over the past two years – I believe that drop is attributable to the fact that the FCA does not offer whistleblowers rewards. Individuals risk their livelihoods when they speak out, and rewards help balance those risks,” Kelton affirmed.
As regulators in both jurisdictions continue their ongoing review of how to fairly optimize whistleblowing procedures and protections, two questions present particularly acute headaches.
Firstly, whether the correct course of action is to impose a large fine on the errant company, when in reality it is shareholders and other stakeholders – such as the entire employee base – who pay the penalty rather than the individual perpetrators of the misconduct.
Secondly, how to stay one step ahead of digital advances in order to ensure adequate protection for whistleblowers when information can be so rapidly leaked and disseminated in today’s tech-centric world.
If whistleblowers don’t believe they have adequate protections to speak up internally, they may reach out to the media, regulators and legislators, often leading to an undesirable outcome for companies, says Bossi.
“Treat them well and whistleblowers are assets – treat them poorly and they will become liabilities,” he concluded.
