One of the things that has always puzzled and dismayed me about the miserable London Capital & Financial (LCF) debacle is: where were the whistleblowers?

LCF, which went bust after ripping off 11,600 investors to the tune of £236m, had a substantial staff as did marketing company Surge Group which remorselessly flogged LCF products via Facebook and YouTube.

I cannot believe that staff at these companies did not have suspicions about what they were flogging but seemingly no-one reported any suspicions to the regulator? If someone had blown the whistle it could have saved thousands of investors from losing huge sums and years of litigation and yet it looks like no-one lifted a finger. 

To be fair, it sounds like the FCA was in a mess at the time, at least in terms of sifting through the hundreds of thousands of calls it received from investors annually. Former FCA CEO Andrew Bailey admitted to the Treasury Committee recently that the regulator had missed hundreds of ‘red flags’ about LCF because it lacked the mechanisms to stitch together an emerging problem.

He revealed that the FCA had received 600 calls from worried investors about LCF although there is little indication yet that any of these were from LCF ‘insiders.’ Most were calls from worried LCF customers, it seems.

I was reminded of this lack of whistle-blowing on LCF this week with news that the FCA is to launch a new drive to encourage whistleblowers.

The regulator has expanded its team of staff dealing with whistleblowing and is to improve training of staff in terms of supporting and protecting whistleblowers.

All of these are positive steps from the regulator and may, just may, help to prevent the next LCF. I certainly hope so. To be effective, however, staff working at firms like LCF who suspect wrongdoing need to have the courage and strength to make call. No amount of whistle-blowing initiatives will make a difference unless staff take the first steps.

I know some people can see internal whistleblowers as ‘snitches’, and the FCA will need to assess all whistleblowing carefully to weed out the bogus claims, but there is no doubt in the financial world they can play a pivotal role. For the regulators they can be a powerful ally and the FCA’s move deserves industry support.

• I'm taking a break for the next 2 weeks. See you in mid April. 

Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with 30 years experience. This topical comment on the Financial Planning news appears most weeks. Follow @FPT_Kevin