New whistleblowing rules in financial services

A package of reforms introduced by the Financial Conduct Authority encouraging whistleblowing in financial services came into effect last week. The rules aim to encourage a culture where individuals feel able to raise concerns and challenge poor practice and behaviour, and have been introduced in response to huge public criticism of the culture within banking including various scandals, such as LIBOR and forex.

The rules on whistleblowing, which took full effect last week, apply to deposit-takers (banks, building societies, credit unions) with over £250m in assets, PRA-designated investment firms, insurers subject to the Solvency II directive, and Society of Lloyd's and managing agents. They also apply as non-binding guidance for all other firms. The key rules on whistleblowing require a firm to:

• appoint a Senior Manager as their whistleblowers' champion (this requirement has applied from 7 March 2016);
• 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; and
• require its appointed representatives and tied agents to tell their UK-based employees about the FCA whistleblowing service.

The regulators have made clear that an employee's fitness and propriety will be in question if he/she mishandles a complaint from a whistleblower, for example by treating a whistleblower detrimentally as a result of making a complaint. The stakes are therefore high for any individual charged with examining a whistleblowing complaint or responsible for staff who have raised concerns. Line managers need to be made aware of their obligations, and banks should ensure that bespoke training is provided on whistleblowing arrangements for all UK-based employees, managers of UK-based employees and employees with responsibility for operating the firm's internal whistleblowing arrangements. The FCA Handbook provides guidance on the types of matters which must be included in any training.