New rules on financial sector whistleblowing
Concerns about the contribution that a failure by staff members to speak up made to the financial crisis of 2008 have prompted a new set of rules on whistleblowing in the financial sector.
The Prudential Regulation Authority and Financial Conduct Authority’s rules complement the Senior Insurance Managers’ Regime and are intended to create and foster a culture of speaking up within the financial sector.
Firms that are affected by the new rules (see below) need to have a compliance routine for the rules in place by September 7th 2016.
Which firms are affected by the new rules?
The new rules will affect the following firms in the financial sector:
Building societies, banks, credit unions and other UK deposit takers who have assets of £250 million or above
Companies designated by the Prudential Regulation Authority as investment firms
Insurance and reinsurance firms that fall within the scope of Solvency II, a European directive that codifies and harmonises European insurance regulation.
If the firm is a UK branch of an overseas bank, the rules do not apply.
The extension of the rules to stockbrokers, mortgage brokers, insurance brokers, investment firms and consumer credit firms is under consultation. For the time being, they are non-binding guidance.
What do firms need to do?
The new rules require firms to:
Draw up and implement internal whistleblowing arrangements that can handle disclosures, including those from outside the organisation. Firms will be free to select the procedures that they wish to use in handling those disclosures.
Appoint a senior manager, who is subject to the Senior Manager/Senior insurance manager regime to act as a ‘whistleblowers’ champion’. They will be responsible for monitoring how well the internal whistleblowing policies are working and preparing the annual report to the board about the way in which the policies are operating. There is no requirement for this person to be involved in the handling of disclosures. Unlike the other changes, this rule will take effect on 7th March 2016.
Inform all employees about the FCA and PRA whistleblowing services. Employees can be encouraged to use internal procedures in the first instance but must be advised that to do so is not obligatory.
Ensure that all UK-based employees, managers and employees involved in the internal whistleblowing arrangements have been fully trained on their duties and responsibilities.Make staff aware of the protection that is available to them under the Public Interest Disclosure Act 1998.
Check all employment contracts and settlement agreements to make sure that the wording does not inadvertently provide a deterrent against whistleblowing.
Inform the FCA if an employment tribunal decides that a whistleblower has been either victimised or dismissed as a result of their actions.
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