SYSC 18 promotes, in the sense that it contains guidance rather than rules, the use of the Public Disclosure Act 1998 in making protected disclosures (‘whistleblowing’). SYSC 18.2.2 specifically encourages firms to adopt internal procedures which will encourage workers with concerns to whistleblow internally about matters which are relevant to the functions of the FCA (or PRA). This is reinforced under SYSC 18.2.3 in which the FCA reminds everyone that it would regard as a serious matter any evidence that a firm had acted to the detriment of a worker who had blown the whistle and could call into question the fitness and propriety of the firm (or relevant members of its staff).
The FCA published a background note on whistleblowing in February which may be of interest. As well as explaining the internal whistleblowing process it reveals that the Regulator received 1,376 notifications under the regime in 2014; the note also provides an outline of some sample cases.
The FCA recently published PS 15/24 ‘Whistleblowing in deposit-takers, PRA-designated investment firms and insurers’ (‘relevant firms’). As suggested by its title, the application of the rules therein are restricted to such relevant firms whilst other firms – which will be the vast majority of firms falling under the remit of the FCA – can look upon them as non-binding guidance. Note that deposit-takers with assets of £250m or less (‘small deposit taker’) will not be required to apply these requirements.
SYSC 18.4 (a new section) introduces the concept of a whistleblowers’ champion. The role of such an individual (the FCA guidance expects that a firm will appoint a non-executive director where one exists – however it is a rule that an insurer appoints a director or senior manager) will be to ensure and oversee “the integrity, independence and effectiveness of the firm’s policies and procedures on whistleblowing”, together with the protection of whistleblowers from being victimised. The role also requires the need to prepare and make a report, at least annually, to the firm’s governing body on the effectiveness of its whistleblowing systems and controls.
SYSC 18.1, which must rank as one of the shortest sections in the Handbook, will be overhauled. Whilst it will still apply to ‘firms’, for the purposes of SYSC 18 a ‘firm’ specifically means every ‘relevant authorised person’ (except for a small deposit taker) which in its simplest form is either a firm with permission to accept deposits or an investment firm that has permission for dealing in investments as principal and when carried on by it that activity is a PRA-regulated activity and a UK Solvency II firm. Other firms that do not fall within this specific meaning may adopt the rules and guidance as best practice and in a manner that reflects its size, structure and headcount.
SYSC 18.2 will be deleted and replaced by SYSC 18.3 which concerns internal arrangements, including training. The FCA’s views on the protection of whistleblowers (see introductory paragraph above) remains and applies to all firms in the accepted sense by virtue of SYSC 18.1.1A (2).
The new requirements come into force in two tranches.
The requirement to assign responsibilities to a whistleblowers’ champion takes effect from 7 March 2016 (this date coincides with the implementation of the Senior Managers Regime – see ‘Regulatory References’ article for further information) with the remaining requirements needing to be in place by 7 September 2016. Between these two dates the whistleblowers’ champion will be responsible for overseeing the steps the firm takes to prepare for the new regime.
Before other firms breathe a sigh of relief that they do not fall within the full scope of the new regime, they should note from para 1.18 (page 7) of PS15/24 that once the new rules have been in effect long enough to assess their effectiveness, the FCA will consider whether similar requirements should be applied to other firms such as “stockbrokers, mortgage brokers, insurance brokers, investment firms and consumer credit firms”.