The new rules on whistleblowing for the financial services sector herald a sea change not only in the way whistleblowing complaints are handled but in a firm’s culture, which should encourage employees to speak out and identify wrongdoing. Firms with effective whistleblowing policies and a culture of engagement are more likely to be able to expose alleged misconduct, dishonesty or illegal activity at an early stage, thereby enabling more effective risk management. The regulators have indicated that they will be proactive in enforcing the new rules.
At present, the whistleblowing rules apply to:
- deposit takers with £250 million in assets (this includes banks and building societies)
- PRA-designated investment firms
- insurers subject to Solvency II Directive
- Society of Lloyd's and managing agents
The FCA is considering whether to extend the new rules more widely to other firms it regulates as well as to UK branches of overseas banks. For the time being, the text of the rules acts as non-binding guidance.
The new rules have been introduced by way of changes to the PRA Rulebook, FCA Handbook and the Senior Managers Regime and firms which have not fully complied with the spirit and intent of the rules will leave themselves open to regulatory scrutiny. If a firm is found to have contravened the rules, it may be subject to enforcement action and action for damages.