Formalising whistleblowing procedures

Banks, building societies, credit unions, investment firms and insurers in the United Kingdom could in future be required to appoint “whistleblowers’ champions in their organisations under proposals set out by the country’s financial services regulators.

Banks, building societies, credit unions, investment firms and insurers in the United Kingdom could in future be required to appoint “whistleblowers’ champions in their organisations under proposals set out by the country’s financial services regulators.

Measures put forward by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) call for a specific individual within such firms to be responsible for overseeing the effectiveness of internal whistleblowing arrangements.

These include arrangements for protecting whistleblowers against detrimental treatment, preparing an annual report to the board about their operation, and reporting to FCA where, in a case before an employment tribunal contested by the firm, the tribunal finds in favour of a whistleblower.

These proposals form part of a raft of measures put forward by the regulators in response to recommendations made by the Parliamentary Commission on Banking Standards.

Organisations would be required to inform their employees that they can blow the whistle to FCA or the PRA and to offer protection to all whistleblowers, regardless of their relationship with the firm and topic of their disclosure.

Firms would also need to include provisions in new employment contracts and settlement agreements which clarify that nothing in those agreements prevent an employee (or ex-employee) from making a protected disclosure.

PRA and FCA said, “These proposals seek to formalise organisations’ whistleblowing procedures and are aimed at moving towards a more consistent approach, building on existing good practice in firms.”

It added, “They aim to ensure that all employees are encouraged to blow the whistle where they suspect misconduct, confident that their concerns will be considered and that there will be no personal repercussions.”

The measures form part of a consultation - which closes on May 22 - and is intended to build upon FCA’s existing guidance on how firms handle whistleblowers.

A spokesperson of the ICC FIB indicated that an in-house whistle blowing system that is properly managed and supported could be invaluable for a corporate’s internal compliance purposes.

In a related development, the regulators have also confirmed that certain non-executive directors (NEDs) of financial institutions and insurers could be held individually liable if they do not take reasonable steps to prevent or stop breaches of regulatory requirements in their areas of responsibility.

NEDs that would fall under PRA’s senior managers’ regime (SMR) and senior insurance managers’ regime (SIMR) are board chairs, senior independent directors and chairs of risk, audit and remuneration committees.

The SMR and SIMR will therefore focus on those NEDs with specific responsibilities for areas or committees directly relevant to a firm’s safety and soundness.

Senior managers in banks will also be subject to a separate offence which could result in them being held criminally liable for reckless decisions leading to the failure of banks. This new criminal offence would be subject to the usual standard of proof in criminal cases which is beyond reasonable doubt.

PRA chief executive Andrew Bailey, who is also deputy governor of the Bank of England said, “senior managers will be held individually accountable if the areas they are responsible for fail to meet our requirements. Our new accountability regime will hold all senior managers, including non-executive directors, to a clear standard of behaviour and we will take action where they fail to meet this.”