Speaking at a securities industry conference on Thursday, FSA chairman Sir Howard Davies said: ‘We are serious about expecting firms to put internal whistleblowing procedures into place and won’t hesitate to consider making rules under the Financial Services and Markets Act if the guidance we plan to issue in the new year does not lead to the higher standards we want to see.
‘And any evidence we get that a firm has acted to the detriment of an employee who has made a disclosure which is protected by whistleblowing legislation could call into question the fitness and propriety of the firm concerned and/or relevant members of the firm’s staff.’
Sir Howard said the upcoming tenth anniversary of Robert Maxwell’s death had stimulated debate as to whether the City is now a cleaner place and whether the new regulatory system will be better able to respond to the challenges posed by an individual determined to circumvent rules and controls.
‘The [DTI’s Maxwell] inspectors draw attention, for example, to the importance of good communication between regulators. That was a fundamental reason for the creation of the FSA. We have now fully integrated the old regulators in managerial terms. And legal integration will come when the legacy arrangements for the nine predecessor regimes are superseded by the Financial Services and Markets Act on 1 December.’
He added: ‘Our regulatory approach for financial services firms operating from N2 should help head off “Maxwell-type” behaviour in future. Our Approved Persons regime requires up to 180,000 people working in the financial services industry to be suitable for the job they are going to do. And firms will need to demonstrate they have effective oversight and control of their business, including adequate risk management arrangements.
‘We firmly believe that good compliance and good risk management are most effectively promoted by tightly defined management structures which clearly allocate responsibilities to identified individuals.’
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