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.
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
- 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.
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.”