FCA highlights whistleblowing areas of improvement for FS firms

Out-Law News | 19 Nov 2018 | 9:51 am | 2 min. read

Financial Services firms have put clear policies and procedures in place to  encourage a 'speak up culture' and ensure that concerns are dealt with robustly and consistently but could improve the way they report on whistleblowing, train staff and highlight the protections available to those who do raise concerns.

The FCA has reviewed the way in which firms have engaged with the whistleblowing rules issued in September 2016 in response to the recommendations of the Parliamentary Commission on Banking Standards.

"The results of the FCA's review demonstrate that the whistleblowing rules have had a positive impact on the manner in which regulated firms approach whistleblowing within their businesses," said financial services employment law expert Ben Brown of Pinsent Masons, the law firm behind Out-Law.com. "However, the review also highlights a number of areas for improvement which need to be made in order to achieve the significant shift in cultural attitude towards whistleblowing demanded by the FCA."

"One of the main areas for improvement is training. The FCA expects regulated firms to develop and roll out detailed and bespoke whistleblowing training. This includes general training to all employees regarding standard whistleblowing procedure and also more detailed training and guidance for senior managers responsible for investigating and dealing with concerns. Regulated firms are required to demonstrate that their training in each of these areas is sufficient to comply with the whistleblowing rules. However, it appears that currently most firms are failing to comply with this requirement," he said.

From an FCA perspective, the term 'whistleblowing' refers to certain stakeholders, including employees, making 'reportable concerns' about a wide range of issues including regulatory breaches, systems and controls failings, breaches of policies and wider reputational or financial harm. This is in addition to, and much wider than, pre-existing protections applicable to workers who make protected disclosures under the Public Interest Disclosure Act. Whistleblowers may make their allegations to other parties in the company, which is known as 'internal' whistleblowing; or to external regulators, law enforcement and, in more limited circumstances, the media.

FCA and Prudential Regulation Authority (PRA) rules require firms to put mechanisms in place to encourage their employees to raise concerns internally and to regulators. They are also required to appoint a senior manager as a 'whistleblowers' champion', responsible for the effectiveness of these arrangements.

The FCA's review found that the new rules are generally helping firms to implement whistleblowing arrangements and manage whistleblowing cases fairly, consistently and in a way which protects individual whistleblowers. The non-executive directors appointed as whistleblowers' champions by firms are also successfully providing independent oversight and accountability, and helping to raise the profile of whistleblowing internally.

However, some firms had not sufficiently documented how whistleblowers would be protected against future victimisation, or set out how this would work in practice as part of the investigation process. Most firms also needed to document and enhance their investigation processes, to ensure that their approach to assessing and escalating concerns is consistent. The FCA was also concerned that some firms had incorrectly stated as part of the policy that employees must raise their concerns internally before contacting the regulator.

Most of the firms reviewed by the FCA did not distinguish between the training that they provided to all UK-based employees, and the training that they provided to managers and investigation teams. The FCA was also concerned that the training was not sufficiently detailed. The regulator also found gaps in the annual whistleblowing reports that firms are required to provide to their governing bodies, particularly where there were not many cases to report.