FCA and PRA Consultation Paper on Whistleblowing in the Financial Industry
15 February 2015
The Parliamentary Commission on Banking Standards recommended that banks put in place mechanisms to allow their employees to raise concerns internally (i.e. whistleblowing). As a result the Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority (“PRA”) have initiated a consultation on a proposed a set of requirements to formalise firms’ whistleblowing procedures.
The purpose of these rules is to ensure that all employees are confident that any concerns about misconduct or wrongdoing will be considered and that there will be no personal repercussions. The proposed rules will apply to U.K. banks, building societies, credit unions, PRA-designated investment firms and insurers.
The proposed rules are intended to encourage employees to raise any concerns, whilst offering measures to protect them from any ill treatment as a result of whistleblowing. This will ultimately help the relevant firms manage their risks more efficiently and expose any misconduct at an early stage. Relevant firms in the U.K. are not currently under a legal or regulatory duty to have whistleblowing arrangements in place.
The measures proposed consist of putting in place a number of internal arrangements, with a focus on offering protection and promoting an opportunity for all employees to raise concerns. Importantly, there is a proposal to allocate the prescribed responsibility for whistleblowing under the Senior Managers Regime and Senior Insurance Managers Regime to an individual, referred to as the “whistleblowers’ champion”, responsible for overseeing the effectiveness of internal whistleblowing arrangements and preparing an annual report to the board about their operation.
The FCA and the PRA propose that the requirements are not imposed on small credit unions with £25m or less in assets.
These proposals only apply to the regulated legal entity; they do not apply to subsidiary undertakings, unless those firms are also U.K.-regulated deposit-takers, PRA-designated investment firms or insurers regulated by the PRA. As a consequence, financial institutions that are formed as a group of related legal entities will not be required to apply these requirements on a group-wide basis.
Whistleblower protection has long been a feature of US law and businesses which operate in both the U.K. and US may already have internationally applicable policies in place. While a consultation is necessary, it is difficult to imagine many businesses speaking out against the rules as currently proposed.This consultation closes on Friday 22 May 2015 and can be found here.