The FCA has finalised its review of how firms have implemented its whistleblowing rules, which became effective from September 2016 (the Rules). A copy of the review can be found here.
The review, which focused on a range of retail and wholesale banks, found that the Rules had helped to ensure that firms implemented whistleblowing arrangements and were managing concerns raised by employees in a fair and consistent way. However, in addition to outlining its observations on areas of good practice, the FCA noted several key areas for improvement and outlined its continuing expectations for firms’ whistleblowing arrangements in the future.
Firms are encouraged to review the FCA’s findings and consider the steps needed to improve their own whistleblowing arrangements in order to actively stop actual or potential harm from developing. The key points from the review are set out below.
FCA’s expectations and senior management
The FCA’s review put emphasis on the responsibility of senior management and the Board to communicate and foster a culture of discussion and challenge in firms so that wrongdoing could be identified and addressed at any early stage. As part of this the FCA expect senior management to:
- oversee and ensure that the firm has fully considered and implemented effective whistleblowing arrangements; and
- assess how the arrangements are working on a continuing basis.
In addition, the FCA set out its expectations in relation to firms and noted that firms should:
- have readily available up-to-date written procedures on whistleblowing;
- ensure that the procedures make it clear that a whistleblowing concern can be made to the FCA or PRA simultaneously or consecutively with any internal report to the firm;
- have an investigation process for how whistleblowing cases are progressed, including how confidentiality will be protected; how information should be assessed; and help the whistleblowers’ champion (it is mandatory that firms appoint a whistleblowers’ champion under the Rules);
- document and embed the approach to the prevention of victimisation;
- submit an annual whistleblowing report to the relevant governing body;
- provide training for UK based employees and managers of UK based employees (including information outlined in SYSC18.3.4G); and
- promptly notify the FCA about contested but lost employment tribunal cases where the claimant based all or part of its claim on detriment suffered or being unfairly dismissed as a result of making a disclosure.
Good practice observed
As part of its review, the FCA noted the following areas of good practice:
- Policies and procedures: firms had either implemented or updated existing policies and procedures following the introduction of the Rules and some had a detailed step-by-step investigation process. The FCA provided an example of one firm’s approach to monitoring victimisation where the firm had monitored employment records of the whistleblower for 12 to 18 months after a reportable concern to ensure that the individual hadn’t suffered any adverse consequences;
- Whistleblowers’ champion and the annual whistleblowing report: firms had appointed an appropriately senior and independent champion and most had met the requirement to produce an annual report. For example, non-executive directors that had been appointed as champions were helping to raise the profile of whistleblowing. Some firms had also commissioned third-party reviews through whistleblowing charities and undertaken staff surveys to check employees understood the arrangements available to them;
- Training: All firms had provided training to their employees and some had provided annual refresher training. The FCA noted that some firms also provided separate training for managers and their investigation teams.
Areas for improvement
The FCA identified the following areas for improvement:
- Policies and procedures: many firms had not fully implemented or considered the requirements relating to whistleblowing in SYSC18. The FCA found that most firms needed to document or enhance their investigation processes and demonstrate how whistleblowers would be protected to ensure a consistent approach. Some firms had also wrongly stated that employees must raise whistleblowing concerns internally before contacting the FCA;
- Whistleblowers’ champion and the annual whistleblowing report: some firms had only developed one report since the Rules became effective. The FCA noted that some reports did not contain a sufficient level of information or analysis;
- Training: most firms needed to improve the detail in their training to ensure that it was clear to employees how they could effectively raise concerns. In addition, the FCA found that the majority of firms did not distinguish between the training provided to all employees and that given to managers and the investigation teams.