Whistleblowing - New Rules, New Policies, New Vision – A Speech by John Price, Commissioner, ASIC

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Friday, November 16, 2018 / 12:13 PM / Mondovisione

 

Whistleblowing - New Rules, New Policies, New Vision - A Speech By John Price, Commissioner, Australian Securities And Investments Commission At The Griffith University Whistleblowing Conference, (Sydney, Australia) 16 November 2018 

 

Introduction

Good morning and thank you for inviting me to speak at this inaugural conference on whistleblowing. 

It’s an honour to be here today to offer ASIC’s perspective on the topic of the Value of Whistleblowing. 

ASIC greatly values whistleblowing and whistleblowers. 

And our reasons are simple. People who report misconduct to ASIC help us to do our job. ASIC can only operate effectively if people are willing to share information or their experiences with us. 

People from inside companies and licensees who report misconduct to us, while potentially risking their own jobs and sometimes their careers and family life, do us a service. 

Whistleblowers coming to ASIC will help us achieve our vision for the financial system and fulfil our regulatory responsibilities. 

And before I talk in more detail about ASIC’s approach to whistleblowing, I’d like to take a quick moment to talk about ASIC’s refreshed vision and mission for the financial system, and how whistleblowers play a part in our strategy.

 

ASIC's vision, mission and strategy

ASIC’s vision is for a fair, strong, and efficient financial system for all Australians. Our vision reflects our purpose as Australia’s conduct regulator for corporations, markets, financial services, and consumer credit, and highlights the role we play on behalf of all Australians. 

To realise ASIC's vision we will use all our regulatory tools to: 

  • change behaviours to drive good consumer and investor outcomes
  • act against misconduct to maintain trust and integrity in the financial system
  • promote strong and innovative development of the financial system, and
  • help Australians to be in control of their financial lives.

 

The Financial Services Royal Commission has highlighted the harms that unlawful and unethical conduct can inflict on individual consumers and investors, and, more broadly, on the financial system. 

ASIC has an important role in driving behaviours that will build and restore trust. We do this by being a strategic and forceful regulator, and by: 

  • identifying harms to consumers, investors, and markets
  • prioritising and addressing the most significant harms
  • accelerating enforcement outcomes
  • implementing new supervisory approaches, and
  • promoting the adoption of regulatory technology by industry.

 

In addition, we will continue to work with the Government on the significant upgrade to ASIC’s enforcement powers and penalties, the proposed financial product design and distribution obligations and intervention powers – and last and certainly not least, on the reforms to Australia’s corporate sector whistleblower regime. 

Turning now to the structure of today’s presentation. 

I will talk about: 

  • the value of whistleblowing, and
  • how we can encourage more whistleblowers to come forward.

 

The value of whistleblowing

As the conduct regulator, ASIC gets our intelligence on what to investigate from a few sources. 

Often it's from people reporting information to us; often, it’s from our surveillances and understanding of the industry. Many times, the most valuable information is from people inside organisations who see wrongdoing every day and take the brave decision to call it out. 

ASIC is grateful for the people who have alerted us to misconduct and recognise their courage and the difficulties they face in coming forward. 

Primarily, what we get from whistleblowers, is the value of their perspective. They give us another way to look at the concerns and misconduct that may be happening in companies and licensees. And another perspective from which to test the information that the companies and licensees themselves are telling us. 

Whistleblowers play an important role in calling out poor conduct and assisting ASIC to do our job. And we have used their information in a number of our enforcement cases. 

How can we encourage more whistleblowers to come forward? 

So, what can we do to encourage more whistleblowers to come forward? 

I’d like to focus on three aspects today. 

  • Firstly, the role of ASIC’s Office of the Whistleblower.
  • Secondly, reforms to the corporate sector whistleblowing regime, and
  • Thirdly, how businesses can better encourage and protect whistleblowers.

 

These three aspects complement each other – collectively, they should encourage more whistleblower reporting.

 

ASIC Office of the Whistleblower

Just over four years ago, ASIC formally established our Office of the Whistleblower. This is headed by Warren Day, who will be participating in the conference later this morning and this afternoon. 

The Office of the Whistleblower acts as a central point within ASIC for ensuring that we record and action whistleblower matters appropriately. 

ASIC has an end-to-end process for dealing with whistleblower reports, overseen by the Office of the Whistleblower. The process is designed to ensure that we: 

  1. inform whistleblowers about their rights and what they can expect from ASIC;
  2. fully and properly assess the information they provide to us; and
  3. keep them up to date about what action ASIC is taking in relation to their report.

 

Importantly, we regularly review and enhance these processes, based on our experience in assisting whistleblowers and dealing with the information they provide to us.

 

ASIC's process for dealing with whistleblower reports 

ASIC’s approach for dealing with whistleblowers is outlined in Information Sheet 52 Guidance for whistleblowers 

ASIC prepares an initial assessment of all reports that whistleblowers provide to us. This ensures we identify all potential whistleblower matters, as well as matters from those who may fall within the statutory definition but do not identify themselves as whistleblowers. We do this to make people aware of the legal protections that may apply to them. 

Once a report is identified as a potential whistleblower matter, we begin to track the matter within our whistleblower handling process. 

ASIC has trained staff to act as the designated point of contact for whistleblowers about the handling of their reports. Where a matter is assessed as requiring further action by ASIC, the whistleblower will be advised about the contact details of the ASIC officer that will be assisting them. 

The officer is responsible for ensuring regular contact and communication with the whistleblower. At a minimum, this should occur once every four months. 

Where ASIC has finalised a matter or decided not to take further action, the officer will communicate the outcome to the whistleblower.

 

ASIC's response to reports from whistleblowers

In 2017–18, ASIC received and assessed 228 disclosures by whistleblowers. 

We can see from whistleblower reports that allegations of corporate misconduct, generally including corporate governance breaches, or conflicts of interest or misuse of company funds, makes up around two thirds (2/3) of whistleblower reports. These are internally focused allegations about the operations and management of the company. 

Misconduct allegations about the provision of financial services and markets misconduct by company or licensee makes up the other third. 

These are the based on the whistleblower reports we receive and assess.

From the last three financial years, we are seeing an increase in the proportion of whistleblower reports about financial services and credit matters. 

This has occurred at the same time as increased public dissatisfaction with the financial services and credit firms, and we are seeing this same dissatisfaction in the employees of those firms, with more coming to us with reports of misconduct. 

In terms of matters that ASIC pursues through surveillance or investigation, around 1/3 of all whistleblower reports being worked on in ASIC stakeholder and enforcement teams relate to the large financial services institutions, reflecting our priorities to improve the functioning of the financial system.

 

Reforms to the corporate sector whistleblowing regime

Turning now to the second aspect of my comments today – reforms to the corporate sector whistleblowing regime. 

Protections for corporate whistleblowers have formed part of the Corporations Act since 2004. The current provisions focus on protecting an ongoing employment or contractual relationship between a whistleblower and a company. 

This is an important component of the regime. Though the regime does not, in ASIC’s view, adequately cover the all the people who may be in a position to observe misconduct and face victimisation if they report it. 

The current protections don’t extend to former employees or former contractors. They don’t cater for a whistleblower seeking to remain anonymous. And, they limit the means for whistleblowers to seek compensation or redress if they suffer victimisation or can no longer work for their employer. 

ASIC, along with many experts, has been advocating for reforms to the existing whistleblowing regime. 

Over the past two years, ASIC has been working closely with the Government on reforms to encourage reporting of corporate wrongdoing and better protect whistleblowers in Australia.

 ASIC also provided funding and assistance to Professor AJ Brown and Griffith University’s Whistle While They Work 2 research project, one of the most detailed and comprehensive pieces of whistleblower research worldwide, which has brought us all together today. 

Like many of you here, I am very much looking forward to hearing the latest research findings from Professor AJ Brown shortly.

 

Proposed reforms to the corporate sector whistleblower regime

As you would be aware, the Government has introduced a bill to amend the whistleblower protections, and it is currently before the Senate. 

The amendments will: 

  • broaden the definition of whistleblowers to include a company’s former employees, officers, and contractors, and certain family members;
  • broaden the types of wrongdoing that whistleblowers can make disclosures about that will attract the protections;
  • clarify who in companies can receive whistleblower disclosures;
  • apply the protections to anonymous disclosures;
  • provide better protections for whistleblowers against detriment, and better access to compensation;
  • expand the orders that may be made by a court in favour of a person who has suffered loss, damage, or injury as a result of detrimental conduct;
  • increase penalties for individuals and corporations if a whistleblower’s identity is revealed without consent;
  • provide avenues for making emergency or public interest disclosures, under certain limited circumstances; and
  • require public and large proprietary companies to have an internal whistleblower policy that is made available to their officers and employees, with penalties applying for non-compliance.

 

In addition, the bill includes a review of the operation of whistleblower protections five years after the commencement of the revised regime. 

We understand that the Government is developing some further refinements to the provisions of the bill to align them with the recommendations from the Senate Committee report. We expect the bill to return to the Senate for debate this year, and are looking forward to the reforms being enacted. 

As we highlighted in ASIC’s 2018–19 Corporate Plan, one of ASIC’s strategic priorities for the next four years is to implement the whistleblower protection reforms. 

This includes putting the necessary systems, processes, and resources in place to receive and handle the wider range of disclosures that will be made to ASIC, which will cover whistleblower reports across almost all the private sector. 

Under the whistleblower reforms, ASIC is expected to receive any report from whistleblowers related to, among other things, any misconduct or improper state of affairs in relation to a company. This will include matters relating to other regulators’ responsibilities that we will need to refer and monitor.

To support ASIC to perform these roles and to demonstrate their commitment to the new regime, the Government has provided ASIC with $6.6 million to implement the reforms.

 

How businesses can better encourage and protect whistleblowers

I’d like to take a few minutes now to talk about what businesses can do to better encourage and protect whistleblowers. 

Whistleblowers don’t just help ASIC. 

Companies and licensees need their own people to come forward when they observe or experience misconduct in the workplace. 

  • Where treated right, and encouraged, people who speak up when they see the wrong thing being done will help their own employers and businesses.
  • Whistleblowing plays an important role to alert businesses to changes that are necessary to improve their performance.

 

As I mentioned earlier, the bill includes a requirement on public and large proprietary companies to have an internal whistleblower policy that is made available to their officers and employees, with penalties applying for non-compliance. 

ASIC has been tasked to develop guidance on this, which we plan to consult on. 

Since this afternoon’s sessions will focus on effective management arrangements for whistleblowing, including developing and designing a whistleblower policy, I thought I should focus on the importance of an organisation’s culture and governance. 

Broadly speaking, an organisation’s whistleblowing policy needs to be robust and make it clear that whistleblowers will be protected. 

The written policy needs to be well communicated – not just internally, but to all the organisation’s stakeholders. 

Procedures need to be in place to enable staff to disclose information if they feel there is wrongdoing. 

These processes require integrity and they require the confidence of staff. 

  • Integrity so that people’s identities are protected, if that’s what they wish
  • Integrity so that the company uses the information for the right purposes, that is, to address misconduct or improve operations, and
  • Confidence that employees can trust that the process will achieve what it sets out to achieve.

 

But it’s also very much about the culture of the organisation. 

The leadership team of the organisation helps set this through the ‘tone from the top’. 

Organisations need to ensure they adopt a culture of professionalism – that is, higher standards of competency, integrity, care, ethics, and conscientiousness. They also need to make sure this culture is cascaded throughout the entire organisation. 

According to research on How to cultivate a whistleblowing culture1, when staff have a clear understanding of good behaviour it will not only make wrongdoing easy to spot, it is also far more likely to be reported and dealt with. In addition, it also reduces the negative connotations of whistleblowing. 

Equally important, there needs to be an environment that people can feel they can come forward to report, knowing that their disclosure will be handled appropriately and acted upon. 

Encouraging employees to speak out about problems should be encouraged – since it will allow organisations to address problems before they turn into crises. 

  • Companies also need to ensure that the right training is provided. The training should cover three key areas: how to raise a concern, how staff will be protected, and how the concern will be dealt with.
  • Employees need to feel confident to speak up about wrongdoing. Company officers and managers need to be trained in dealing with disclosure and supporting their employees. Others in the company management also need to understand the systems and processes to support the members of their team.

 

Conclusion

To wrap up…

ASIC greatly values whistleblowers and we are grateful for the important service they provide to us. 

I am confident that the new rules, new policies, and new vision on Whistleblowing we are here to discuss today will help to provide a much safer environment for people to come forward and blow the whistle. 

From a regulator’s perspective, providing whistleblowers with the confidence to come forward is important in assisting with the deterrence, detection, and prosecution of misconduct – which in turn is crucial in helping ensure there is a fair, strong and efficient financial system for all Australians.

 

Thank you.

 

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