FSA hotline aims to help whistleblowers

So far, compliance failure, unauthorised regulated activity and fears about company solvency have ranked highest among callers' concerns. Suspicions of fraud and insider dealing have also prompted at least two calls.

It is hardly surprising that the FSA's hotline has attracted attention. In the wake of the financial scandals at Enron and WorldCom, whistleblowing has become a familiar word in the corporate lexicon.

At Enron, the now bankrupt energy trader, accountant Sherron Watkins prophetically warned that the company could "implode in a wave of accounting scandals". At WorldCom, internal auditor Cynthia Cooper exposed the company's efforts to conceal 2.5bn (€3.9bn) of expenses.

Guy Dehn, of Public Concern at Work, a UK charity that offers assistance for whistleblowers, says that events at Enron and Worldcom have sent out a clear signal that whistleblowing is nothing to be afraid of: "Watkins and Cooper are still in employment. That sends out a huge message that you need not lose your job if you blow the whistle."

Nevertheless, something seems to be holding financial services employees back. A spokesperson for the FSA said that the hotline had attracted less interest than was anticipated. "The line was well publicised, but it has been used by relatively few people," he says.

The limited use of the FSA's hotline may reflect organisations' efforts to improve lines of communication internally. As well as drawing attention to the hotline number, the regulator also requires that all firms within its jurisdiction make provision for employees to "blow the whistle" to someone inside the firm.

Organisations have taken heed. For example, at Fidelity International, the fund manager, it is now company policy to ensure that there are several avenues available to employees who want to blow the whistle on suspicious activities.

Gareth Adams, head of compliance at Fidelity, says: "The compliance and legal departments both have responsibility for whistleblowing. In each region there is also someone who is one step removed from the business and can be contacted if no one else seems independent enough." If all else fails, Fidelity has even designated an individual at its head office in Bermuda who is available to take whistleblowing calls.

Bill McCabe, operational risk manager at Tokai Bank Europe, says that reporting lines within organisations have become much more important: "If someone has a concern, there shouldn't be a need to blow the whistle externally."

However, blowing the whistle to someone inside the firm can take courage. William Kenyon, a partner in the forensic services department at PricewaterhouseCoopers, says that internal whistleblowers must be assured that if they voice their suspicions, something will be definitely done. They also need to know that they will not be punished, even if their fears prove unfounded.

Fortunately for UK whistleblowers, the last point is enshrined in law. The 1999 Public Interest Disclosure Act ensures that anyone complaining about an "unlawful act" in the workplace may claim unlimited compensation if they are subsequently dismissed without a good reason.The sums involved can be considerable. In 2000 the finance director of a telecoms company won 293,000 when a court decided he was unfairly dismissed for raising concerns about the managing director's expenses.

But the act is open to abuse. Stephen Levinson, a partner at K Legal, the law firm associated with KPMG, says that the law protecting UK whistleblowers is "seriously flawed". Unscrupulous individuals are claiming to be whistleblowers in order to win big compensation payouts from their employers. People who fear being made redundant are able to draft letters raising concerns about alleged "unlawful acts" to their employer, or make telephone calls to whistleblowing hotlines. When they have been made redundant they can then point to their "whistleblowing" activities as the source of their dismissal, he says.

If investment banks prepare for more redundancies, the FSA's hotline might be used by such unscrupulous employees. But the number of genuine calls might also rise, to judge by reaction to a poll on the eFinancialCareers.com website. More than 80% of respondents said they would blow the whistle if they found out about irregular goings-on at their company.

Advice for whistleblowers

· Seek advice from someone you trust (be wary of talking to a work colleague; they could become involved).

· Keep a sense of perspective - remember there may be an innocent explanation.

· Consider all the possible consequences of whistleblowing before you act.

· Don't try to get to the bottom of the matter yourself.

· Find out if your firm has an internal whistleblowing contact.

· Consider calling an external body eg Public Concern at Work or the FSA.

· Don't become a whistleblower for personal gain or to pursue a personal grievance.