Whistleblowing in the financial services sector : the position under Maltese law

Abstract

It is the aim of this thesis to examine Maltese legislation on whistleblowing within the context of financial services and to show that a serious attempt should be made to promote whistleblowing within the Maltese financial services sector. By way of introduction, Chapter 1 aims to examine and define the phenomenon of whistleblowing and to explore the reasons behind the increasing importance and encouragement given to whistleblowers. Although in the past the approach taken to employees blowing the whistle was negative, in recent years there has been increasing recognition that whistleblowing is not only in the self-interest of an organisation but also in the interest of the market as a whole. It is suggested that by protecting genuine whistleblowers, the law helps to maintain the confidence of shareholders, consumers and the public in the institutions active in the financial services sector. Following an examination of the increasing importance given to the necessity of implementing whistleblowing procedures within institutions active in the financial services sector, Chapter 2 aims to examine UK and US legislation governing whistleblowing. This Chapter will consequently focus on the UK Public Interest Disclosure Act 1998 and the so-called US Sarbanes-Oxley Act of 2002 since these may be said to be the primary sources of whistleblowing legislation world wide. It is suggested that an evaluation of Maltese legislation on whistleblowing is only possible if such legislation is examined within the context of foreign legislation, particularly UK legislation which is often the source of recent Maltese legislation in the financial services sphere. Chapter 3 aims to examine the way the Maltese legislator has sought to provide protection to whistleblowers under Maltese Law; the applicability of the Maltese whistleblowing provisions within the financial services sector will also be examined. Reference will consequently be made to the amendments introduced to the Professional Secrecy Act1 by virtue of Act XVII of ?.002, to article 1627 A of the Civil Code2 and to the Employment and Industrial Relations Act3 which under Maltese Law may be said to be the main whistleblowing provisions. The Professional Secrecy Act (as amended) provides for the release of confidential information to the public authorities where the detection or punishment of criminal activity is involved. Article 1627 A prohibits discriminatory action or sanction against any employee who in good faith blows the whistle on suspected corruption of his employer; this provision also gives any employee who suffered such discriminatory action or sanction, the right to compensation for any damage caused by such discriminatory action or sanction. The Employment and Industrial Relations Act makes it illegal to victimise any employee for having disclosed information, confidential or otherwise, to a designated public regulating body regarding alleged illegal or corrupt activities being committed by his employer or by persons acting in the employer's name and interests. Chapter 4 will examine role-prescribed whistleblowing by auditors since it is submitted that the concept of whistleblowing must be interpreted widely, so as to include the reporting of wrongdoing by persons whose role it is to report on such wrongdoing. Reference will consequently be made to the various Maltese financial services laws which all contain provisions imposing upon auditors the duty to report certain relevant information to the regulator, which in all cases is the Malta Financial Services Authority ("MFSA"). In conclusion, chapter 5 will examine the effectiveness of the current Maltese whistleblowing provisions as well as the role of the MFSA in promoting a culture of whistleblowing within the Maltese financial services sector. The MFSA, as the single regulator of financial services in Malta has a vital role to play in encouraging all authorised financial institutions subject to it, to adopt, implement and communicate internal procedures which will encourage workers to blow the whistle internally about matters relative to its functions. It is submitted that the MFSA has a further role to play since as the regulator of financial services it should be the recipient of employees' disclosures regarding any irregularities within the ambit of financial services.