FCA whistleblowing campaign

The FCA has launched a whistleblowing campaign ‘in confidence, with confidence’ to encourage individuals working in financial services firms to report potential wrongdoing.

Whistleblowing is considered vital to expose poor practice and prevent wrongdoing in activities regulated by the FCA.

Firms’ senior management are expected to have effective whistleblowing arrangements in place to enable employees to raise concerns. However, even where such arrangements exist, some individuals may still be reluctant to speak out or to report potential wrongdoing internally.

As a result, the FCA has developed guidance to outline how whistleblowing works and includes details of how individuals can make contact by telephone, email or letter. The guidance is intended to reassure potential whistleblowers and give them the confidence to come forward if they need to. Firms should communicate the availability of this process to staff.

Whistleblowing rules

There are formal rules in SYSC 18 covering the whistleblowing requirements for firms that satisfy the definition of:

(a) a UK SMCR banking firm except a small deposit taker; or

(b) a firm as referred to in Chapter 1.1 of the PRA Rulebook: Solvency II Firms: Whistleblowing Instrument 2015.

These can be summarised in ‘expectations’ recently published by the FCA which stated:

“We expect the senior management of firms to:

  • oversee and ensure that their firm has fully considered and implemented effective whistleblowing arrangements
  • continuously assess how the arrangements are working in practice

Firms should:

  • Have up-to-date written procedures, which are readily available to employees, outlining the firm’s approach whistleblowing.
  • Clearly explain that raising a whistleblowing concern to the FCA or PRA is not conditional on a report first being made using the firm’s internal arrangements and that concerns can be raised internally and to the PRA or FCA simultaneously or consecutively.
  • Have a documented investigation process that explains how they progress whistleblowing cases and provide a clear and consistent approach for those responsible for operating the firm’s arrangements to follow. This should include information on how to protect a whistleblower’s confidentiality, assess and grade the significance of information provided by whistleblowers and help the whistleblowers’ champion when asked to do so.
  • Document and embed their approach to preventing victimisation across their whistleblowing arrangements. This should ensure that the necessary measures and safeguards are in place to protect whistleblowers from retaliation or being otherwise disadvantaged.
  • Ensure a whistleblowing report is made annually to its governing body. This report is required to ensure the firm’s governing body has ongoing oversight of the operation and effectiveness of its whistleblowing systems and controls. The annual report is required regardless of the number of whistleblowing cases reported and must maintain the confidentiality of individual whistleblowers.
  • Ensure the whistleblowers’ champion has the responsibility for overseeing the production of the annual whistleblowing report and overseeing the integrity, independence and effectiveness of the firm’s whistleblowing arrangements. This includes policies and procedures on protecting against victimisation.
  • Provide appropriate training for UK-based employees, managers of UK-based employees wherever the manager is based, and employees responsible for operating the firms’ internal whistleblowing arrangements. This should include the information outlined in our Handbook (SYSC18.3.4G).
  • Tell us promptly about contested but lost employment tribunal cases, where the claimant successfully based all or part of their claim on either detriment suffered as a result of making a protected disclosure in breach of section 47B of the Employment Rights Act 1996 or being unfairly dismissed under section 103A of the Employment Rights Act 1996.”

Applicability to other all other firms

All other firms, not referred to in the definition above are not formally within the remit of the rules (but see the exception below) but may adopt the rules and guidance in SYSC 18 as best practice. If a firm chooses to do so, the rules and guidance can be approached in a manner that reflects, and is proportionate to its size, structure and headcount.

Exception

There is one paragraph of guidance (SYSC 18.3.9) that does formally apply to ALL firms and that is as follows:

“The FCA would regard as a serious matter any evidence that a firm had acted to the detriment of a whistleblower. Such evidence could call into question the fitness and propriety of the firm or relevant members of its staff, and could therefore, if relevant, affect the firm’s continuing satisfaction of threshold condition 5 (Suitability) or, for an approved person or a certification employee, their status as such.”

 

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

Everyone working in financial services should be concerned to ensure that unacceptable practices are identified and addressed. Whistleblowing is clearly a valuable weapon in the fight against bad practice and we would encourage firms to create or review whistleblowing processes in light of the FCA updated guidance and ensure good awareness in staff.

Action Required By You

All firms should allow for the possibility that a whistleblowing situation could arise and have appropriate processes in place to facilitate a whistleblower making an internal report and to ensure that all staff are aware of the option to report directly to the FCA on a confidential basis. This might involve staff training but will certainly include communicating the FCA option, email address and guidance to all staff as a minimum.
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About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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