Financial Whistleblowing on the Rise in Europe

As we’ve noted in previous posts, the SEC Whistleblower Program has resulted in a sharp increase in the amount of actionable information provided to the agency, with more than 3000 whistleblower tips received in 2013 alone. Now, reports from the Europe and the United Kingdom – which have experienced their own rash of financial scandals in recent years – indicate that financial fraud whistleblowing is also gaining traction overseas. The Financial Conduct Authority ( or FCA), which regulates financial services firms in the U.K., reported last week that the number of tips received from whistleblowers had increased by approximately two-thirds in 2013. A second U.K. financial services regulator, the Serious Fraud Office, received approximately 4,400 tips to its “SFO Confidential” whistleblowing program between January 2012 and June 2013 alone. Europeans with knowledge of fraud affecting U.S. companies are also reporting those potential violations to the SEC – with the U.K. being the leading source of SEC whistleblower tips outside the U.S. in 2013.

At the same time, British and European regulators are showing increased interest in adopting many of the features of the SEC Whistleblower Program, including heightened anonymity protections and the potential for monetary awards. I witnessed this effort firsthand when I was invited by M.P. Gisela Stuart to speak at the House of Commons about how the key components of the SEC Whistleblower Program could be used to enhance financial fraud enforcement in the U.K. Now, at the direction of the Parliamentary Banking Commission, the FCA is considering adding a monetary incentive to its whistleblower program to encourage additional reports. Likewise, European lawmakers have introduced a proposal to create a whistleblower program within the European Securities and Markets Authority (“ESMA”) – the  authority responsible for safeguarding the EU’s securities markets – which would allow whistleblowers to report potential abuses to ESMA without disclosing their identities. While it’s not clear that these proposals will be accepted, it’s encouraging to see that regulators around the world are thinking seriously about whistleblowing, and willing to learn from each other in the effort to prevent fraud and protect investors