The Financial Conduct Authority (FCA), alongside the Prudential Regulation Authority (PRA), has published new rules on whistle-blowing. These changes follow recommendations in 2013 by the Parliamentary Commission on Banking Standards (PCBS) that banks put in place ways to allow their employees to raise concerns internally (that is, to ‘blow the whistle’) and that they appoint a senior person to take responsibility.
Tracey McDermott, acting FCA chief executive, said: “Whistle-blowers play an important role in exposing poor practice in firms and they have in the past few years contributed intelligence crucial to action taken against firms and individuals. It is in the interests of the industry and regulators alike that wrongdoing is identified and addressed promptly. For individuals to have the confidence to come forward, it is vital that firms have in place adequate policies on dealing with whistleblowers and that a senior manager takes responsibility for overseeing these policies.
“These rules are designed to build on and formalise examples of good practice already found in parts of the financial services industry and aim to encourage a culture in which individuals working in the industry feel comfortable raising concerns and challenge poor practice and behaviour.”
The authorities admit that those working for financial institutions may be reluctant to speak out about wrong-doing for fear of suffering as a consequence. Mechanisms within firms to encourage people to voice concerns – by, for example, offering confidentiality to those speaking up – can provide comfort to whistle-blowers. It is, however, important that individuals also have the confidence to approach their employers, the FCA says. Hence its rules designed to build on and formalise the good practice, already widespread in the financial services industry, according to the authority. These rules aim to encourage a culture where individuals feel able to raise concerns and challenge poor practice and behaviour. The rules on whistle-blowing, which take full effect in September 2016, apply to deposit-takers (banks, building societies, credit unions) with over £250m in assets, and to insurers subject to the Solvency II directive; they are non-binding guidance for all other firms we supervise. The new key rules require a firm to:
– appoint a senior manager as their whistle-blowers’ champion
– put in place internal whistle-blowing arrangements able to handle all types of disclosure from all types of person
– put text in settlement agreements explaining that workers have a legal right to blow the whistle
– tell UK-based employees about the FCA and PRA whistle-blowing services
– present a report on whistle-blowing to the board at least annually
– inform the FCA if it loses an employment tribunal with a whistle-blower
– require its appointed representatives and tied agents to tell their UK-based employees about the FCA whistle-blowing service.
Background
The FCA has in recent years taken a number of steps to encourage whistleblowers to come forward to it, including a detailed review of its procedures and increasing the resources dedicated to the area. The FCA says that it has seen an increase in the number of reports it receives; for example, there were 1340 whistle-blowing disclosures recorded for financial year 2014/15 against 1040 in 2013/14 (28pc increase). In the financial year 2007-08 the then Financial Services Authority received 138.
These publications follow publication of the FCA’s and PRA’s final rules on improving individual accountability in the UK banking sector in July 2015.
