Senior arrangements, Systems and Controls

Chapter 18
Whistleblowing

SYSC 18 : Whistleblowing

Section 18.1 : Application and purpose

18.1

Application and purpose

Application.....................................................................................................
18.1.1

G[deleted]18.1.1A

R

This chapter applies to:(1) a firm;(2) in relation to the guidance in ■ SYSC 18.3.9G, every firm;(3) in relation to ■ SYSC 18.3.6R and ■ SYSC 18.3.10R, EEA SMCR banking
firms and overseas SMCR banking firms only in relation to a branch
maintained by them in the United Kingdom; and(4) in relation to ■ SYSC 18.6.1R to ■ SYSC 18.6.3G (Whistleblowing
obligations under MiFID):(a) a UK MiFID investment firm, except a collective portfolio
management firm; and(b) a third country investment firm; and(5) in relation to ■ SYSC 18.6.4G to ■ SYSC 18.6.5G (Whistleblowing
obligations under other EU legislation), a person within the scope of
the identified EU sectoral and cross-sectoral legislation.

18.1.1AAGFirms are reminded that for the purpose of ■ SYSC 18 (except for■ SYSC 18.3.9G) “firm” has the specific meaning set out in paragraph (8) ofthat definition in the Glossary, namely:(a) “(8) (in ■ SYSC 18, with the exception of the guidance in■ SYSC 18.3.9G):(a) a UK SMCR banking firm except a small deposit taker; and(b) a firm as referred to in Chapter 1.1 of the PRA Rulebook: Solvency IIFirms: Whistleblowing Instrument 2015.”

1818.1.1B

SYSC 18/2

RIn this chapter, a reference to a provision of the Employment Rights Act 1996
includes a reference to the corresponding provision of the EmploymentRights (Northern Ireland) Order 1996.

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SYSC 18 : Whistleblowing

18.1.1CGSection 18.1 : Application and purpose

A firm not referred to in ■ SYSC 18.1.1AR may adopt the rules and guidance inthis chapter as best practice. If so, it may tailor its approach in a manner thatreflects its size, structure and headcount.

Purpose.....................................................................................................
18.1.2

G(1) The purposes of this chapter are to:(a) set out the requirements on firms in relation to the adoption,and communication to UK-based employees, of appropriate
internal procedures for handling reportable concerns made bywhistleblowers as part of an effective risk management system(■ SYSC 18.3);(b) set out the role of the whistleblowers’ champion (■ SYSC 18.4);(c) require firms to ensure that settlement agreements expressly
state that workers may make protected disclosures (■ SYSC 18.5)
and do not include warranties related to protected disclosures;(ca) set out the requirements which implemented the whistleblowing
obligation under article 73(2) of MiFID, which requires MiFID
investment firms (except collective portfolio management firms)
to have in place appropriate procedures for their employees toreport potential or actual infringements of the MiFID regime(■ SYSC 18.6);(cb) outline other EU-derived whistleblowing obligations similar to
those in article 73(2) of MiFID, some of which may also beapplicable to MiFID investment firms (■ SYSC 18.6);(d) outline best practice for firms which are not required to apply themeasures set out in this chapter but which wish to do so; and(e) outline the link between effective whistleblowing measures andfitness and propriety.
(2) [deleted]18.1.3G[deleted]18■ Release 39● Aug 2024

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SYSC 18/3

SYSC 18 : Whistleblowing

Section 18.3 : Internal arrangements

18.3

Internal arrangements

Arrangements
to be appropriate and effective.....................................................................................................
18.3.1

R(1) A firm must establish, implement and maintain appropriate andeffective arrangements for the disclosure of reportable concerns bywhistleblowers.
(2) The arrangements in (1) must at least:(a) be able effectively to handle disclosures of reportable concerns
including:(i) where the whistleblower has requested confidentiality or has
chosen not to reveal their identity; and(ii) allowing for disclosures to be made through a range ofcommunication methods;(b) ensure the effective assessment and escalation of reportableconcerns by whistleblowers where appropriate, including to theFCA or PRA;(c) include reasonable measures to ensure that if a reportableconcern is made by a whistleblower no person under the controlof the firm engages in victimisation of that whistleblower;(d) provide feedback to a whistleblower about a reportable concern
made to the firm by that whistleblower, where this is feasible andappropriate;(e) include the preparation and maintenance of:(i) appropriate records of reportable concerns made bywhistleblowers and the firm’s treatment of these reports
including the outcome; and(ii) up-to-date written procedures that are readily available tothe firm’s UK-based employees outlining the firm’s processes
for complying with this chapter;(f) include the preparation of the following reports:(i) a report made at least annually to the firm’s governing bodyon the operation and effectiveness of its systems and controls
in relation to whistleblowing (see ■ SYSC 18.3.1R); this reportmust maintain the confidentiality of individual
whistleblowers; and18(ii) prompt reports to the FCA about each case the firm
contested but lost before an employment tribunal where theclaimant successfully based all or part of their claim on either
detriment suffered as a result of making a protected

SYSC 18/4

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SYSC 18 : Whistleblowing

Section 18.3 : Internal arrangements

disclosure in breach of section 47B of the Employment Rights
Act 1996 or being unfairly dismissed under section 103A ofthe Employment Rights Act 1996;(g) include appropriate training for:(i) UK-based employees;(ii) managers of UK-based employees wherever the manager isbased; and(iii) employees responsible for operating the firms’ internalarrangements.

18.3.2

G(1) When establishing internal arrangements in line with ■ SYSC 18.3.1R afirm may:(a) draw upon relevant resources prepared by whistleblowing
charities or other recognised standards setting organisations; and(b) consult with its UK-based employees or those representing theseemployees.
(2) In considering if a firm has complied with ■ SYSC 18.3.1R the FCA willtake into account whether the firm has applied the measures in (1).
(3) A firm may wish to clarify in its written procedures for the purposesof ■ SYSC 18.3.1R(2)(e)(ii), that:(a) there may be other appropriate routes for some issues, such asemployee grievances or consumer complaints, but internalarrangements as set out in ■ SYSC 18.3.1R(2) can be used to blow
the whistle after alternative routes have been exhausted, inrelation to the effectiveness or efficiency of the routes; and(b) nothing prevents firms taking action against those who havemade false and malicious disclosures.

18.3.3

G(1) A firm may wish to operate its arrangements under ■ SYSC 18.3.1R
internally, within its group or through a third party.
(2) Firms will have to consider how to manage any conflicts of interest.
(3) If the firm uses another member of its group or a third party tooperate its arrangements under ■ SYSC 18.3.1R it will continue to be
responsible for complying with that rule.

Trainingand development.....................................................................................................
18.3.4

GA firm’s training and development in line with ■ SYSC 18.3.1R(2)(g) should
include:(1) for all UK-based employees:

18(a) a statement that the firm takes the making of reportableconcerns seriously;(b) a reference to the ability to report reportable concerns to thefirm and the methods for doing so;■ Release 39● Aug 2024

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SYSC 18/5

SYSC 18 : Whistleblowing

Section 18.3 : Internal arrangements(c) examples of events that might prompt the making of areportable concern;(d) examples of action that might be taken by the firm after
receiving a reportable concern by a whistleblower, including
measures to protect the whistleblower’s confidentiality; andinformation about sources of external support such as
whistleblowing charities;(2) for all managers of UK-based employees wherever the manager isbased:(a) how to recognise when there has been a disclosure of areportable concern by a whistleblower;(b) how to protect whistleblowers and ensure their confidentiality ispreserved;(c) how to provide feedback to a whistleblower, where appropriate;(d) steps to ensure fair treatment of any person accused ofwrongdoing by a whistleblower; and(e) sources of internal and external advice and support on thematters referred to in (a) to (d);(3) all employees of the firm, wherever they are based, responsible for
operating the firm’s arrangements under ■ SYSC 18.3.1R, how to:(a) protect a whistleblower’s confidentiality;(b) assess and grade the significance of information provided bywhistleblowers; and(c) assist the whistleblowers’ champion (see ■ SYSC 18.4) when asked
to do so.

18.3.5

G

Where a firm operates its arrangements under ■ SYSC 18.3.1R throughanother member of its group or a third party it should consider providing
the training referred to in ■ SYSC 18.3.4G(3) to the persons operating thearrangements by the group member or third party.

Reportingof concerns by employees to regulators.....................................................................................................
18.3.6

R

This rule applies to an EEA SMCR banking firm and an overseas SMCRbanking firm.
(1) A person subject to this rule (‘P’) must, in the manner described in (2),communicate to its UK-based employees that they may disclose
reportable concerns to the PRA or the FCA and the methods fordoing so. P must make clear that:(a) reporting to the PRA or to the FCA is not conditional on a report
first being made using P’s internal arrangements;(b) it is possible to report using P’s internal arrangements and also tothe PRA or FCA; these routes may be used simultaneously orconsecutively; and18(c) it is not necessary for a disclosure to be made to P in the firstinstance.
(2) The communication in (1) must be included in the firm’s employee
handbook or other equivalent document.
SYSC 18/6

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SYSC 18 : Whistleblowing

Section 18.3 : Internal arrangements

18.3.6A

G[deleted]

18.3.7RFirms must ensure that their appointed representatives or, where applicable,their tied agents, inform any of their UK-based employees who are workers
that, as workers, they may make protected disclosures to the FCA.

Appointed
representatives and tied agents.....................................................................................................
18.3.8

GFirms are encouraged to invite their appointed representatives or, whereapplicable, their tied agents to consider adopting appropriate internal
procedures which will encourage workers with concerns to blow the whistle
internally about matters which are relevant to the functions of the FCA orPRA.

Link
to fitness and propriety.....................................................................................................
18.3.9GThe FCA would regard as a serious matter any evidence that a firm had acted
to the detriment of a whistleblower. Such evidence could call into question
the fitness and propriety of the firm or relevant members of its staff, andcould therefore, if relevant, affect the firm’s continuing satisfaction ofthreshold condition 5 (Suitability) or, for an approved person or acertification employee, their status as such.

Additionalrules for UK branches.....................................................................................................
18.3.10R(1) This rule applies where an EEA SMCR banking firm or an overseas
SMCR banking firm has:(a) a branch in the United Kingdom; and(b) a group entity which is a UK SMCR banking firm.
(2) An EEA SMCR banking firm and an overseas SMCR banking firm must,in the manner described in (3), communicate to the UK-based
employees of its UK branch:(a) the whistleblowing arrangements of the group entity that is a UK
SMCR banking firm; and(b) indicate that these arrangements may be used by employees ofits UK branch.
(3) The communication in (2) must be included in the branch’s employee
handbook or other equivalent document.

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SYSC 18/7

SYSC 18 : Whistleblowing

Section 18.4 : The whistleblowers’ champion

18.4

18.4.1GThe whistleblowers’ champion(1) A UK SMCR banking firm is required under ■ SYSC 24.2.1R to allocate
the FCA-prescribed senior management responsibility for acting as thefirm’s whistleblowers’ champion.
(2) ■ SYSC 18.4.2R requires the appointment by an insurer of a director orsenior manager as its whistleblowers’ champion.
(3) This section sets out the role of the whistleblowers’ champion.
(4) The FCA expects that a firm will appoint a non-executive director as
its whistleblowers’ champion. A firm that does not have a nonexecutive director would not be expected to appoint one just for thispurpose.

18.4.2

RAn insurer must appoint a director or senior manager as its whistleblowers’champion.

18.4.3R

A firm must assign the responsibilities set out in ■ SYSC 18.4.4R to its
whistleblowers’ champion.

18.4.4

RA firm must allocate to the whistleblowers’ champion the responsibility forensuring and overseeing the integrity, independence and effectiveness of thefirm’s policies and procedures on whistleblowing (see ■ SYSC 18.3 (InternalArrangements)) including those policies and procedures intended to protect
whistleblowers from being victimised because they have disclosed reportableconcerns.

18.4.5GThe whistleblowers’ champion:(1) should have a level of authority and independence within the firmand access to resources (including access to independent legal adviceand training) and information sufficient to enable him to carry outthat responsibility;(2) need not have a day-to-day operational role handling disclosuresfrom whistleblowers; and18(3) may be based anywhere provided he can perform his function
effectively.

SYSC 18/8

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SYSC 18 : Whistleblowing

18.4.6

GSection 18.4 : The whistleblowers’ champion

The role of a whistleblowers’ champion, before the introduction of his or her
responsibilities under those provisions of ■ SYSC 18 which are to come intoforce on 7 September 2016, includes oversight of the firm’s transition to its
new arrangements for whistleblowing.

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SYSC 18/9

SYSC 18 : Whistleblowing

Section 18.5 : Settlement agreements withworkers

18.5

Settlement agreements withworkers

18.5.1R

A firm must include a term in any settlement agreement with a worker thatmakes clear that nothing in such an agreement prevents a worker frommaking a protected disclosure.

18.5.2

E(1) Firms may use the following wording, or alternative wording which
has substantively the same meaning, in any settlement agreement:“For the avoidance of doubt, nothing precludes [name of worker]
from making a “protected disclosure” within the meaning of Part 4A(Protected Disclosures) of the Employment Rights Act 1996. Thisincludes protected disclosures made about matters previously
disclosed to another recipient.”(2) Compliance with (1) may be relied on as tending to establish
compliance with ■ SYSC 18.5.1R.

18.5.3R(1) Firms must not request that workers enter into warranties which
require them to disclose to the firm that:(a) they have made a protected disclosure; or(b) they know of no information which could form the basis of aprotected disclosure.
(2) Firms must not use measures intended to prevent workers frommaking protected disclosures.

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SYSC 18/10

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SYSC 18 : Whistleblowing

18.6

Section 18.6 : Whistleblowing obligations
under the MiFID regime and other sectoral
legislation

Whistleblowing obligations underthe MiFID regime and othersectoral legislation

Whistleblowing
obligations under the MiFID regime.....................................................................................................
18.6.1

R(1) A MiFID investment firm (except a collective portfolio management
investment firm) must have appropriate procedures in place for its
employees to report a potential or actual breach of:(a) any rule which implemented MiFID; or(b) a requirement imposed by MiFIR or any onshored regulation
which was previously an EU regulation adopted under MiFID orMiFIR.
(2) The procedures in (1) must enable employees to report internallythrough a specific, independent and autonomous channel.
(3) The channel referred to in (2) may be provided through arrangements
made by social partners, subject to the Public Interest Disclosure Act
1998 and the Employment Rights Act 1996 to the extent that theyapply.
[Note: article 73(2) of MiFID]

18.6.2R■ SYSC 18.6.1R applies to a third country investment firm as if it were a MiFID

investment firm (unless it is a collective portfolio management investmentfirm) when the following conditions are met:
(1) it carries on MiFID or equivalent third country business; and(2) it carries on the business in (1) from an establishment in the UnitedKingdom.

18.6.3

GWhen considering what procedures may be appropriate for the purposes of■ SYSC 18.6.1R(1), a UK MIFID investment firm or a third country investment
firm may wish to consider the arrangements in ■ SYSC 18.3.1R(2).

Whistleblowing
obligations under other sectoral legislation.....................................................................................................
18.6.4G■ Release 39

In addition to obligations under the MiFID regime, similar whistleblowing
obligations apply to miscellaneous persons subject to regulation by the FCA
under the following non-exhaustive list of legislation:● Aug 2024

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SYSC 18/1118

SYSC 18 : Whistleblowing

Section 18.6 : Whistleblowing obligations
under the MiFID regime and other sectoral
legislation(1) article 32(3) of the Market Abuse Regulation, as implemented insection 131AA of the Act;
(2) [deleted](3) the UK provisions which implemented article 99d(5) of the UCITS
Directive (see ■ SYSC 4.1.1ER in respect of UK UCITS managementcompanies, and ■ COLL 6.6B.30R in respect of depositaries) ;(4) article 24(3) of the securities financing transactions regulation; and(5) section 97A of the Act, as regards obligations under the Prospectus
Regulation, the PR Regulation, and the Prospectus RTS Regulation.

18.6.5G

Depending on the nature of its business, in addition to ■ SYSC 18.6.1R, a
MiFID investment firm may, for example, be subject to one or more of therequirements in ■ SYSC 18.6.4G.

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SYSC 18/12

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