So you want to be a whistle-blower

Gareth Stokes, FAnews Online Editor

As a stakeholder in the financial services industry you’re sure to encounter business practices that flout legislation. Whether you witness these transgressions as an employee at a financial services provider, working for a product provider or as a practising intermediary you have a moral responsibility to report your experiences to the regulatory authority. In many cases this means raising your concern with the Financial Services Board (FSB). Of course ratting out your employer (or ‘whistle-blowing’ in everyday English) isn’t the easiest thing to do.

One of the questions put to the FSB panel at the recent Financial Planning Institute of Southern Africa’s Annual Convention 2009 was how the FSB handled whistle-blowers – especially where it came to protecting their identity. Chief executive of the FSB, Dube Tshidi, took to the podium to answer the question.

Confidentiality is provided for in the legislation

He told potential whistle-blowers their identity would be protected. “In the Financial Services Board Act there is a provision on confidentiality, which binds everyone at the FSB,” said Tshidi. Any information forwarded to the FSB under the whistle-blowing guise is treated in complete confidence. Tshidi added that in his experience, spanning 15 years with the FSB, the regulator had “never disclosed its sources and never been challenged as to who the sources were.”

Any information sent to the FSB accusing an individual or company of legal transgression is accepted as “pure allegation.” It’s important to understand that the FSB won’t act directly on information received by a whistle-blower. Instead the organisation embarks on an investigation process. Although this may result in delays in tackling allegations of abuse it’s important for a number of reasons.

Five reasons for independent investigation

Tshidi provided five reasons why allegations resulted in investigations rather than immediate intervention.

· To establish of true facts. The FSB has a duty to establish the true facts behind any allegation. When the FSB takes legal action it must do so on facts that “belong to the FSB.” They cannot simply base their case on hearsay.

· To protect the whistle-blower. This observation is fairly obvious. The whistle-blower’s identity must be protected and the FSB cannot make reference to this person during proceedings. “Whatever we are doing is as result of an investigation conducted by the FSB,” said Tshidi.

· To demonstrate the Registrar’s independence. Tshidi noted: “The investigation is completed to demonstrate the Registrar’s independence and dependence on his own facts rather than on allegations as submitted to him.”

· To achieve fairness to the accused. If the FSB takes a whistle-blower’s comments as fact without further investigation there’s a good chance the process will be abused. All accusations must be ratified before the FSB embarks on legal action.

· To do justice to the allegations. And finally, said Tshidi, the “investigation will do justice to [the whistle-blower’s allegations.” A complete investigation will ensure the facts of the matter come to light, the appropriate legal action is taken, the transgressor punished and the consumer protected.

Handle employer disputes on your own time

Although no complaint will be ignored the FSB prefers that allegations include a timeframe. If you direct accusations against an employer they would like to know whether you are in the company’s employ when the allegation is made. “Don’t expect the FSB to go and fight your battles with your former employer or former colleagues,” warned Tshidi, perhaps alluding to cases where disgruntled ex-employees have tried to use the regulator to make a point.

Tshidi ended his presentation with a plea to professionals in the industry to continue sending information to the FSB. The regulator has the teeth to tackle those who step out of line, but like any good industry watchdog it relies on the eyes and ears of the financial professional working in the trenches.

Editor’s thoughts:
Every time a financial scandal breaks we’re amazed at how many apparently professional people had knowledge of some level of financial irregularity. A timely intervention at the first sign of impropriety will certainly soften the blow of a scheme collapse many years down the line. Have you reported transgressions to the FSB – and if so – do you feel your allegations were appropriately dealt with? Add your comments below, or send them to gareth@fanews.co.za