This September, the Senior Managers Regime (SMR) brought in a change to the process of whistleblowing.
Workers have always been protected from suffering as a result of making a protected disclosure.
Under existing rules, a protected disclosure in the financial services sector is typically one of three things, explains Arpita Dutt, partner at Brahams Dutt Badrick French.
While the new rules have limited application on financial advice firms, I would encourage all firms to implement an appropriate whistleblowing policy which fully supports employees. Keith RichardsThese are that:
■ An employer has or is likely to breach a legal obligation.
■ An employer has or is likely to commit a criminal offence.
■ An employer is attempting to cover up a breach of legal obligation or criminal offence.
If an employee is successful in a claim for whistleblowing at an employment tribunal, the damages can be uncapped - subject to a duty on the employee to mitigate their losses, adds Ms Dutt.
Individual managers can be pursued directly in the tribunal and the regulator may fine individuals for subjecting employees to detriment.
However, while there is no “express obligation” to blow the whistle, Ms Dutt comments: “The new rules do place increasing pressure on senior managers to do so.”
Under the SMR rules set by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), it is mandatory to notify the FCA of any conduct rule breaches using Form H.
The reporting window for submitting form H opened on 1 September 2016 and will close on 31 October 2016 - and even if there were no breaches, it is still mandatory to submit a nil return, unless you are a credit union.
The new SMR rules, outlined in Policy Statement PS 15/24 - Whistleblowing in deposit-takers, PRA-designated investment firms and insurers - also require relevant firms to:
■ Appoint a senior manager as a whistleblowing champion.
■ Establish internal whistleblowing channels and inform staff about whistleblowing legislation.
■ Present an annual report to the board on whistleblowing.
■ In the event that a tribunal makes a finding that a whistleblower has suffered a detriment as a result of whistleblowing, FCA regulated firms must report this to the regulator.
Ms Dutt adds: “In the event of a failing in their area of responsibility, senior managers must show they took reasonable steps to avoid a contravention.
“The regulator’s guidance suggests in satisfying their individual duties, it may no longer be sufficient for a senior manager to fall back on collective decision making.”
Again, while this applies now to large deposit takers, investment firms coming under the PRA’s remit and credit unions, these rules will eventually be rolled out across the whole financial services industry in 2018.
Linda Todd, head of operations for Bankhall, comments: “It is likely larger firms will be particularly affected.
“These firms often have complex corporate structures, which increases the risk that the responsibility and therefore the accountability of key people may become blurred.
“Regulators are keen to clamp down on any grey areas.”
Keith Richards, chief executive of the Personal Finance Society (PFS), says: “These rules aim to encourage a culture where individuals feel able to raise concerns and challenge poor practice and behaviour.
“While the new rules have limited application on financial advice firms, I would encourage all firms to implement an appropriate whistleblowing policy which fully supports employees who wish to report a serious ethical concern.
“Employees should be reassured their concerns will be listened to, that they will be given a fair hearing and that their ethical concerns will be responded to appropriately.
“Such reassurance is important for building and maintaining an ethical culture.”
