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FCA produces new rules to help informants

Chris Hamblin, Editor, London, 6 October 2015

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New rules to make it safe for employees at financial firms to 'inform' on their employers and others are to take full effect in the United Kingdom on 7th September 2016.

The Financial Conduct Authority's latest 'whistle-blowing' decree, out today, will only apply to deposit-takers (banks, building societies, credit unions) with more than £250 million in assets and to insurers subject to the European Union's 'Solvency II' directive.

In 2013, the Parliamentary Commission on Banking Standards said that every big bank ought to help its employees to raise concerns internally by appointing a senior person to take responsibility for the effectiveness of its 'whistle-blowing' arrangements. In February, the FCA consulted interested parties on the subject and today's decree is the result. Each affected firm will have to:

  • appoint a senior manager as a 'champion' (see the 'systems and controls' part of the FCA's rulebook at SYSC 4.5 and 18) for its 'whistle-blowers';
  • make arrangements that can cope handily with all types of disclosure from all types of person;
  • put text in settlement agreements to say that workers have a legal right to 'blow the whistle';
  • tell employees who work in the UK about the FCA's and Prudential Regulation Authority's whistle-blowing services;
  • present a report on whistle-blowing to the board at least annually;
  • inform the FCA if it loses a case in an employment tribunal with a whistle-blower; and
  • require its appointed representatives and tied agents to tell their employees who work in the UK about the FCA whistle-blowing service.

The idea is to make things easier for employees at financial firms to tell the FCA about bad things that they have seen at work without fear of reprisal from over-mighty employers. Current arrangements are not effective. Were they to become so, it would be harder for compliance officers to shield their firms' misdeeds from the eyes of the regulator, no matter how much pressure they were feeling from their boards. Indeed, if the UK ever reached a point where ordinary, occasional informants were to supplant their firm's compliance officer in usefulness as 'the regulator's informant,' things might look bleak for the compliance vocation.

There is still no attempt to place a regulatory duty on a firm’s staff to raise concerns or, in the regulators' parlance, blow some whistles. This publication knows of no other country where the regulations impose this duty. This is probably because of the difficulty of listing the misdeeds that deserve to be reported and the fact that, without such a list, one man's 'concern' is another man's triviality.

Nevertheless, the FCA has come up with some ideas about what disclosures should be 'protected.' It appears to call these 'qualifying disclosures.' It holds a worker to be making such a disclosure if it is in the public interest and is of information which, in the reasonable belief of the worker, 'tends to show' that one or more of the following has been, is being, or is likely to be, committed:

  • a criminal offence; or
  • a failure to comply with any legal obligation; or
  • a miscarriage of justice; or
  • the putting of the health and safety of an individual in danger; or
  • damage to the environment; or
  • deliberate concealment relating to any of these things.

It is immaterial whether the so-called 'failure' happened outside the UK, so presumably any act of witchcraft in Saudi Arabia or blasphemy in Pakistan is covered.

Some might accuse the FCA of complacency on this subject, especially in view of the language it is using to promote the new rules, stating that they are designed "to build on and formalise the good practice already widespread in the financial services industry." If this is the FCA's rose-tinted view of the culture of workplace bullying that is widespread in the financial services industry, it is unfortunate indeed.

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