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Compliance & Risk

FCA investigating up to 4 whistleblowing champions for senior manager failings: FoI request

· 5 minute read

· 5 minute read

The U.K.’s Financial Conduct Authority (FCA) is investigating up to four non-executives for failing to perform their senior management function as whistleblowing champion within their financial services firm.

A Freedom of Information Act (FoI) request FOI6005, filed in November 2018 and made public in February, revealed the FCA had received four complaints about the behavior of whistleblowing champions. Thomson Reuters Regulatory Intelligence (TRRI) then tried to find out if the complaints related to a single, or multiple, whistleblowing champions with FOI6330, submitted in March.

The FCA’s FoI team asked repeatedly for more time to consider the request before declining to provide the information on the grounds that it would be likely to prejudice the regulator in performing its duties. Specifically, the grounds given for refusal is that if disclosed now it would prejudice an FCA enquiry or action.

TRRI is aware of the identity of one of the individuals who is the subject of a complaint, about their alleged improper handling of a whistleblowing complaint at a major bank, and the FoI request attempted to find out if they were the subject of the other complaints.

Under the FCA Handbook, section SYSC 18.4, all firms are required to appoint one of their non-executive directors to the role of whistleblowers’ champion. “A firm must allocate to the whistleblowers’ champion the responsibility for ensuring and overseeing the integrity, independence and effectiveness of the firm’s policies and procedures on whistleblowing (see SYSC 18.3 (Internal Arrangements)) including those policies and procedures intended to protect whistleblowers from being victimized because they have disclosed reportable concerns,” SYSC 18.4 says.

However, identifying the named individual who holds the whistleblowers’ champion mantle at a financial services firm is not easy. Firms are not required to put the name of the individual on their websites, nor can the champion be identified by a Senior Management Function (SMF) number on the FCA Register. The decision not to assign an SMF number to the SYSC 18.4 responsibilities was taken by the FCA and Prudential Regulation Authority, not U.K. lawmakers, and so could be changed without primary legislation.

“Whistleblowers are the first line of defense against crime, corruption and cover ups… This report shines a light on a culture that too often supports the covering up of wrongdoing and the penalizing of whistleblowers.”

The FCA acknowledges that it is within its remit to create a SMF number for the whistleblowers’ champion but that it has no plans to do so.

U.K. lawmakers recently called for major overhaul of the U.K.’s whistle-blowing legislation. A significant concern is the mistreatment of individuals once they raise concerns at firms.

“Whistleblowers are the first line of defense against crime, corruption and cover ups… This report shines a light on a culture that too often supports the covering up of wrongdoing and the penalizing of whistleblowers,” said Stephen Kerr, co-chair of the All Party Parliamentary Group on Whistle-blowing (APPGW) in the introduction to its report Whistle-blowing; The Personal Cost of Doing the Right Thing and the Cost to Society of Ignoring it.

More than two-thirds of the whistleblowers who gave evidence to the APPGW said they had faced retaliation after speaking up. The report also highlighted that in just 12% of cases an organization had acted on wrongdoing identified by a whistleblower. In the most egregious cases highlighted by the APPGW whistleblowers are subjected to disciplinary action themselves and dismissed, on the basis of false allegations.

Whistleblowers’ champions are intended by the FCA to ensure allegations are investigated thoroughly and that individuals speaking up are not mistreated. Baroness Kramer, co-chair of the APPGW, told TRRI that the group planned to meet with the FCA to discuss the implications of its report.

“The main problem is that these arrangements might look good on paper but can be ineffective or insufficient in practice. Some of the respondents to our call for evidence referred to this as ‘window dressing’ and ‘a charade’,” the report said about the FCA’s Senior Managers and Certification Regime (SM&CR) requirements for whistleblowing.

The FCA did not respond to a request for comment.

This article was written by Lindsey Rogerson of Thomson Reuters Regulatory Intelligence



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