Research obtained by international law firm Pinsent Masons from the Financial Conduct Authority (FCA), show that 1,104 whistleblowing cases were created in 2015, down from 1,367 in 2014, representing a drop of nearly a fifth.
Michael Ruck, a senior financial services enforcement lawyer at Pinsent Masons and formerly with the FCA said:
"These figures demonstrate the clear need for a culture shift across financial services. Since the FCA announced new rules in 2015, we are yet to see much of a shift to an environment in which individuals feel confident to report bad behaviour. Instead, financial institutions are finding an increased interest from employees around their responsibilities and ownership with many escalating concerns internally on a defensive basis."
FCA whistleblowing rules – to be fully implemented in line with the Senior Managers' Regime (SMR) – have been introduced to encourage whistleblowing. Part of the aim of the rules was to assign responsibilities to a 'whistleblowers' champion' to put systems in place that create the right internal culture and environment. This requirement comes into effect on 7 September 2016.
The introduction of a whistleblowers' champion is to increase accountability and encourage a culture in which individuals feel comfortable raising concerns and challenging poor practice and behaviour. With the deadline to comply with the requirements drawing nearer; applicable firms need to have mechanisms in place to allow their employees to raise concerns internally.
The role of the whistleblowers' champion is to:
- visibly promote a healthy environment to encourage responsible reporting and escalation
- deliver positive messages about the importance of best practice
- be a role-model and set the tone for others to follow
- drive engagement amongst management to embed the right culture through the business
"Senior managers' decisions are in danger of becoming based on personal interest and liberty rather than applying a risk based approach. To encourage an increase in whistleblowing reports, there is a clear need for whistleblowers' champions to follow the approach outlined; to avoid such a defensive practice which will only further worsen with the fast approaching implementation of new whistleblowing requirements," comments Michael Ruck.
Whilst both regulators and banks alike are in the early stages of finding their feet in how to deal with and manage the all aspects of the SMR, such effects are already beginning to show. FCA research conducted in August 2016 showed that c. 132,000 people are on the Financial Services Register following the introduction of the SMR, 35,000 less than prior to the SMR requirements being introduced in March.
Michael Ruck adds: "Whether this reduction is entirely a direct result of the SMR is open to debate but is a clear indication of individuals with senior management responsibilities taking the decision to terminate their roles in financial services firms, many of whom took the decision in light of the additional requirements and responsibilities under the SMR."