FCA introduces new rules on whistleblowing
Published: 06/10/2015 Last Modified: 19/04/2016
The Financial Conduct Authority (FCA), alongside the Prudential Regulation Authority (PRA), has today published new rules in relation to whistleblowing. These changes follow recommendations in 2013 by the Parliamentary Commission on Banking Standards (PCBS) that banks put in place mechanisms to allow their employees to raise concerns internally (i.e., to ‘blow the whistle’) and that they appoint a senior person to take responsibility for the effectiveness of these arrangements.
Today’s publications follow on from the publication of the FCA’s and PRA’s final rules on improving individual accountability in the UK banking sector on 7 July 2015.
Tracey McDermott, acting FCA chief executive, commented:
"Whistleblowers 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."
Individuals working for financial institutions may be reluctant to speak out about wrongdoing for fear of suffering personally 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 whistleblowers. It is, however, important that individuals also have the confidence to approach their employers.
The FCA has therefore today published a package of rules designed to build on and formalise the good practice already widespread in the financial services industry. These rules aim to encourage a culture where individuals feel able to raise concerns and challenge poor practice and behaviour. The rules on whistleblowing, 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 on whistleblowing require a firm to:
- appoint a Senior Manager as their whistleblowers’ champion
- put in place internal whistleblowing 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 whistleblowing services
- present a report on whistleblowing to the board at least annually
- inform the FCA if it loses an employment tribunal with a whistleblower
- require its appointed representatives and tied agents to tell their UK-based employees about the FCA whistleblowing service
The FCA has in recent years taken a number of steps to encourage whistleblowers to come forward to the organisation, including conducting a detailed review of its whistleblowing procedures and increasing the resources dedicated to the area. The FCA has seen an increase in the number of reports it receives; for example, there were 1340 whistleblowing disclosures recorded for financial year 2014/15 against 1040 in 2013/14 (28% increase). In the financial year 2007/08 the then Financial Services Authority received only 138.
Notes to editors
- PS15/24: Whistleblowing in deposit-takers, PRA-designated investment firms and insurers
- CP15/31: Strengthening accountability in banking and insurance: regulatory references
- The FCA document: How we handle disclosures from whistleblowers
- The Accountability Regime in relevant authorised persons
The Senior Managers Regime focuses on individuals who hold key roles and responsibilities in relevant firms. In preparation for the new regime, relevant firms must map out how responsibilities have been allocated within the firm, and prepare Statements of Responsibilities for individuals performing Senior Management Functions (senior managers).
The Certification Regime applies to other staff who could pose a risk of significant harm to the firm or any of its customers (for example, staff who give investment advice or submit to benchmarks). These staff will not be pre-approved by regulators, but firms will assess their fitness and propriety.
The Conduct Rules set out a basic standard for behaviour for all staff covered by the new regimes. Firms will need to ensure that these staff are aware of the Conduct Rules and understand how they apply to what they do. Individuals subject to either the Senior Managers Regime or the Certification Regime will be subject to the Conduct Rules from the commencement of the new regime on 7 March 2016. Firms will then have a year to prepare for the wider application of the Conduct Rules to other staff.
- Future publications on banking accountability
- Final rules on the inclusion of wholesale activities in the Certification Regime – in time for commencement of the regime
- Preparing for implementation
- Submission deadline for grandfathering notifications – 8 February 2016
- Commencement Date of SMR and Certification Regime – 7 March 2016
- First annual submission notifying breaches of the Conduct Rules required – end October 2016
- Application of Conduct Rules to staff who are not within the SMR or Certification Regime – 7 March 2017
- First annual submission notifying breaches of the Conduct Rules including staff who are not within the SMR or Certification Regime – end October 2017
- PCBS report: Changing Banking for Good. Volume 1 and Volume 2
- On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.
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