The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have taken joint action to impose a fine of £642,430 on the chief executive of a high street banking group, after he acted inappropriately in attempting to uncover the identity of a whistleblower.
The case is described by the regulators as “the first case brought by the FCA and PRA under the Senior Managers Regime.”
The saga began when a member of the bank’s Board received an anonymous letter from someone claiming to be a shareholder, who expressed concerns over the process used to recruit a particular employee. Three days later, a second letter was received, which expressed similar concerns, but here the sender claimed to be an employee of the bank. Despite warnings from his internal compliance function, the chief executive continued his efforts to uncover the identity of the sender of the first letter, believing that as the author was not claiming to be an employee, it was not covered by the whistleblowing procedures.
It should be noted however that, whilst the FCA believes he breached his duty to act with due skill, care and diligence, it did not conclude that his actions raised concerns over his integrity.
As part of its enforcement action, the FCA and PRA also acted to force the bank comply with a series of special measures regarding its whistleblowing systems and controls. Until 2020, it must report annually to the FCA and PRA regarding any whistleblowing cases that concern its Senior Managers and/or where attempts were made to identify any anonymous whistleblowers. The bank’s dedicated Whistleblowers’ Champions will be required to provide personal attestations as to the soundness of the firm’s whistleblowing systems and controls.
Mark Steward, FCA Executive Director of Enforcement and Market Oversight, said:
“Given the crucial role of the Chief Executive, the standard of due skill, care and diligence is more demanding than for other employees.
“[NAME] breached the standard of care required and expected of a Chief Executive in a way that risked undermining confidence in [NAME OF FIRM]’s whistleblowing procedures. Chief Executives must act with a high degree of care and prudence at all times. 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.”
Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA, said:
“Protection for whistleblowers is an essential part of keeping the financial system safe and sound. [NAME]’S behaviour fell below the standard we require, resulting in today’s fine and public censure. In addition, [NAME OF FIRM] is now subject to special requirements to report to the PRA and FCA how it handles its whistleblowing cases in the coming years.”
Although this case relates to one specific high street bank, managers of all authorised firms should ensure that they are aware of their obligations regarding whistleblowing. All firms should have written whistleblowing procedures in place, which provide a method by which employees can confidentially raise concerns about the firm’s practices. Disciplinary action can only be taken against a whistleblower if it can be demonstrated that they acted maliciously in raising the issue.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article