Whistleblowers: You Know they Make Sense if You’re a Regulator!

Whistleblowers

The FCA published last week new rules on whistleblowing. The key requirements of the new rules are 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 new rules will not come into force until September 2016, but the senior manager whistleblowing champion must be identified in time for the launch of the Senior Managers Regime in March 2016.

In the accompanying press release Tracey McDermott, acting FCA chief executive, says:

“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.”

It’s not hard to see why a regulator would want to encourage this. Indeed as Ms McDermott herself says in the same release:

“It is in the interests of the industry and regulators alike that wrongdoing is identified and addressed promptly.”

Clearly, the more regulators can rely on the employees of institutions to be their eyes and ears the easier their task becomes.

Later in the same press release she says:

“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.”

The senior manager, who will be a non-executive director, must be responsible for overseeing the preparation of an annual report on whistleblowing for the board (and available to the FCA or PRA) on request.

All of which is quite true but, as with all good regulation, there is a balance to be struck between creating “the right culture” and creating one that breeds concern that unless you point a finger first, you will end up at the wrong end of someone else’s digit!

Perhaps that’s why the most eye-catching aspect of these rules is the requirement on banks and other financial institutions to appoint a whistleblowing champion in the form of a senior manager. The idea here seems to be that the senior manager, who will be a non-executive director, must be responsible for overseeing the preparation of an annual report on whistleblowing for the board (and available to the FCA or PRA) on request. The aim seems to be to put whistleblowing firmly on board agendas.

The FCA has said that the senior manager does not necessarily have to make himself or herself available to direct approaches. Whilst that may come as a relief to the individuals concerned, it raises interesting questions as to how the senior manager will be able to demonstrate that he or she is championing the cause to the satisfaction of the regulators. If for example there is no whistleblowing activity to report to the FCA or PRA in any given period, will this be taken to be a good thing or a bad thing?

About Francis Kean

Francis is an Executive Director in Willis Towers Watson's FINEX Global, where he specializes in insurance for Dir…
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