My Lords, I recognise that the hour is very late. I will try to be brief. Noble Lords will also be delighted that my knowledge of cricket is so limited that I shall have to abandon that theme.
This amendment is on whistleblowing. I tabled it in Committee. Essentially, this is a very similar amendment that does two things. It would provide for the regulator to give additional protection to whistleblowers in the financial services industry and require the regulator, as part of those powers, to provide mandatory compensation to whistleblowers who provide original information that leads to prosecution or sanction with financial consequences for the institution. This is very much modelled on Dodd–Frank and a much longer tradition of mandatory compensation for whistleblowers in the United States, which underpins its very successful culture of whistleblowing and tackling financial crime by financial institutions.
When I brought this amendment forward in Committee, the objection was to creating an office of the whistleblower, so under this revised version the powers would go to the FCA, which may decide how it would like to set up that arrangement. I recognise that this has no future in this Bill because we are in wash-up, but this is another of those issues that will carry over to future pieces of legislation, essentially for three reasons that I will touch on quickly.
First, the way we have dealt with whistleblowers in the financial industry is, frankly, an utter disgrace. Since I moved the amendment in Committee, I have been put in contact with more people in the industry who have been whistleblowers whose lives have been completely destroyed. People have lost all employment and had to rely on spending their savings and assets. They have faced serious attack from the highly skilled, very capable and aggressive lawyers of the financial institutions and have, frankly, been let down by the regulator. In many cases, I think no one would question that kind of description of the experience that whistleblowers have had to deal with in the industry.
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There have been changes. The FCA has strengthened protection for whistleblowers in the industry, but only at the margins. I want to make two points about why it is so important that we go further. First, it is extremely rare in the UK for there to be a whistleblower. When you look for an example of another situation where no whistleblower has come forward, I am afraid that the financial industry constantly provides a new example—so the one that I am about to cite is a new one since we last had this discussion in this House. The House will be aware that, last February, a number of employees of HBOS were convicted of what the judge described not just as fraud but as a “grotesque” crime that had “ripped apart” some 200 small companies, many of which then went into bankruptcy, with some £1 billion involved in the scam. The interesting aspect was disclosure of an internal report by Lloyds, obtained by the media, that demonstrated not only that the fraud had begun
in 2003 but that it was known to senior executives, including the chief executive of HBOS, as early as 2008, that that information was available to Lloyds when it took over HBOS and that it was not until 2014 that Lloyds brought it to the attention of the regulators and the police. There was no whistleblowing to expose this kind of issue, or at least not successfully to do so. We have case after case in the UK where we do not see that insider information coming forward and being made available to the regulator and the authorities. That culture must be changed. We have a culture that regards whistleblowers either as people who are required to be extraordinary saints and martyrs or as people who have gone and let the side down, and they do not carry the kind of respect that they would in the United States.
My second example is slightly different. Members of this House will be aware that the chief executive of Barclays in April apologised for attempting to use Barclays’ internal security team to track down the authors of anonymous letters that were sent to the board and a senior executive making allegations about a colleague whom the chief executive, Jes Staley, had recruited. The search entailed two major investigations which involved not only investigators from within the institution but bringing in security services from the United States to hunt down and expose the whistleblower. The good part of the story is that the institution eventually recognised the offence and Jes Staley will apparently pay a significant financial penalty as a consequence of his behaviour. What struck me most was his letter of what is typically called “apology”, in which he defended the culture that sat behind his behaviour. It stated:
“One of our colleagues was the subject of an unfair personal attack sent via anonymous letters addressed to members of the board and a senior executive”.
He felt that the allegations were designed,
“to maliciously smear this person … In my desire to protect our colleague, however, I got too personally involved in this matter”.
It is the idea that protecting your colleague, protecting your friends, protecting other senior managers and protecting your institution is the approach that you take when allegations are made, instead of treating those allegations as serious and a crucial part of keeping a clean institution.
That is the culture that we have to tackle. It is one the few times when I say that we need to move from the British-gentleman’s-club attitude that we have so often had in this industry towards the much more aggressive questioning and cynical attitude that is present in the United States. With that goes mandatory compensation, because it is crucial to recognise that when people whistleblow, particularly when it impacts on senior management in an organisation, the chances that they will have the life and career that they would otherwise have had are minimal. Our experience in the UK is that they find that they lose all opportunity to work. They are required to work their way through their assets, they depend on the charity of friends and there is huge damage to their families. It is time that we confronted this, recognised best practice and adopted best practice. I know that it cannot happen today, but I am concerned, as I think are others in this House, that we do not let this issue rest.