Lessons in Responding to Whistleblower Complaints from Recent UK Settlement
The UK’s Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) recently reached a settlement with the CEO of Barclays Group, James Staley, for failing to “act with due skill, care and diligence” in his response to an anonymous whistleblower complaint. The UK regulators’ response to Mr. Staley’s conduct merits consideration by directors and officers of Canadian public issuers and registrants in light of the broad anti-reprisal provisions in PART XXI.2 of Ontario’s Securities Act.
Whistleblowers protections in OSC Regime
For a summary of the current Whistleblower regime of the Ontario Securities Commission (the OSC), see our previous article. Anti-retaliation measures are an important part of that regime.
- The OSC expects that employers will not discipline, demote, terminate, harass or otherwise retaliate against a whistleblower who has made a report either “up the ladder” internally or directly to regulators.
- The OSC also expects employers not to impede any potential whistleblower from making a report to regulators by contractual agreement (including confidentiality agreement) or otherwise.
- The Securities Act and the Commodity Futures Act were recently amended to introduce a civil cause of action for whistleblowers who experience reprisal for cooperating with the OSC.
In June 2016, the Barclays board received an anonymous letters raising concerns about Mr. Staley and a senior employee who had been recruited by the bank. Mr. Staley believed that the letters, which were treated as whistleblower complaints, were an unfair attack on his hiring strategy and on the senior employee. Mr Staley asked the bank’s security chief to attempt to identify the author(s) of the anonymous letters.
Barclays’ internal investigation found that Mr. Staley had “honestly, but mistakenly, believed” his conduct was permissible. The UK regulators concluded Mr Staley “made serious errors of judgement” although there was “no personal gain”. The UK regulators stated that Mr. Staley should have:
- recognized that he had a conflict of interest in relation to the letter;
- maintained an appropriate distance from the investigation into the allegations raised in the letter; and
- consulted fully with those with expertise and responsibility for whistleblowing in Barclays and sought express confirmation from them that what he wanted to do was permissible.
The settlement also noted:
… whistleblowers play a vital role in exposing poor practice and misconduct in the financial services sector. It is critical that individuals who wish to raise concerns feel able to speak up anonymously and without fear of retaliation. Mr Staley’s actions fell short of the standard of due skill, care and diligence expected of a CEO in a regulated firm: he risked compromising the value of an important resource by which the financial services industry and regulators can identify poor behaviours. That risk was exacerbated given the high profile of Mr Staley and Barclays within the financial services industry.
In addition to the settlement, Barclays voluntarily agreed to provide the UK regulators with certain particulars of whistleblowing cases between 2018 to 2020, including any cases where whistleblower retaliation was alleged.
 The broad definition of whistleblower reprisal in Ontario’s Securities Act does not explicitly speak to an attempt to identify a whistleblower. The Act defines a “reprisal” as
“any measure taken against an employee that adversely affects his or her employment and includes but is not limited to,
(a) ending or threatening to end the employee’s employment;
(b) demoting, disciplining or suspending, or threatening to demote, discipline or suspend an employee;
(c) imposing or threatening to impose a penalty related to the employment of the employee; or
(d) intimidating or coercing an employee in relation to his or her employment.” (emphasis added)
Yet if retaliatory conduct follows the identification of the employee, it may be that the first steps in the identification process, even if not clearly unlawful, are treated as inappropriate. The OSC may use its “public interest power” or use its influence in its many reports and notices about best practices to counsel against conduct that does not technically breach a specific provision in the securities legislation.
 The main lesson from the UK settlement is that directors or officers who have a conflict of interest in relation to a whistleblower complaint should be arm’s length from the investigation into the allegations in that complaint.
 The UK regulators imposed penalties of £458,000 each on Mr. Staley with a 30% discount for early settlement.
 Section 121.5, Securities Act (Ontario).
whistleblower whistleblowing program Whistleblowing FCA OSC whistleblower protection whistleblower anti-reprisal