Regulation  

Senior managers regime to push whistleblowing complaints

Senior managers regime to push whistleblowing complaints

The widening out of the Senior Mangers and Certification Regime at the end of this year could see a rise in the number of whistleblowing complaints made to the Financial Conduct Authority, a compliance expert has said. 

Mark Turner, managing director of the compliance and regulatory practice at Duff & Phelps, said the industry could see a direct correlation between SMCR and a rise in whistleblowing cases as the regulation was designed to avoid individuals in a company "brushing issues under the carpet". 

Under the SMCR, to be rolled out across the wider financial services industry in December this year, bosses performing key roles need FCA approval before starting work and receive a 'statement of responsibilities' that clearly identifies what they are responsible and accountable for.

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Mr Turner's prediction followed data reported by FTAdviser's sister publication the Financial Times yesterday, which found a 24 per cent rise in whistleblowing to the FCA in 2018, with the regulator receiving 1,755 complaints last year compared with 1,420 in 2017.

Mr Turner said: "The new regime itself will make it riskier for individuals to ignore something that doesn't look right, and if they do they will be putting themselves at risk under the enforcement rules. 

"This will be the biggest point, as the FCA has intentionally designed this regulation to make people think twice about issues within a company.

"On a smaller basis SMCR will educate individuals, including senior managers, as to what is expected of them and others within a business and may lead to an increase in whistleblowing cases as a result." 

But Mr Turner warned whistleblowing to the regulator should not be a "default" option within companies, suggesting it should be used as a final option when internal processes have failed. 

Despite this, Mr Turner said there was a role for whistleblowers in even the "most organised and well governed" organisations. 

Alan Lakey, founder of CI Expert, said: "Certainly the theory suggests a rise in whistle-blowing. Equally, many will be considering their own positions within the firm and will be reluctant to go public.

"Individuals might confront senior management and effect change without the regulator ever hearing about it." 

The regulator introduced new rules for protecting whistleblowers in 2015 and in June 2018 increased the resources it allocates to managing and handling complaints from whistleblowers.

In May last year the FCA and PRA jointly fined Jes Stayely, the chief executive of Barclays, £642,430 after he tried to identify a whistleblower at the bank.

In addition to the fine, the two regulators subjected Barclays to special requirements which meant it had to report annually on how it handles whistleblowing, with personal attestations from those senior managers responsible for the relevant systems and controls.

The measures were the first of their kind applied to a regulated firm in relation to whistleblowing.

The FCA stated at the time: "Whistleblowers play a vital role in exposing poor practice and misconduct in the financial services sector. It is critical that individuals are able to speak up anonymously and without fear of retaliation if they want to raise concerns."