Davies promises FSA will give whistle-blowers full protection

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Sir Howard Davies, chairman of the Financial Services Authority, yesterday warned that he will crack down on any bank or securities house that victimises an employee who blows the whistle on malpractice.

He told the Securities Houses Compliance Officers' Group conference: "The upcoming 10th anniversary of Robert Maxwell's death has 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.

"Any evidence we get that a firm has acted to the detriment of an employee who has made a disclosure which is protected by whistle-blowing legislation could call into question the fitness and propriety of the firm concerned and/or relevant members of the firm's staff."

Maxwell, the millionaire publishing entrepreneur, died in the early hours of 5 November 1991 when he fell off his luxury yacht sailing near the Canary Islands. At the time his businesses, which included Mirror Group Newspapers and the US Macmillan book publishing group, were heavily in debt and creditors were known to be running out of patience.

Sir Howard added that he would not hesitate to consider making rules under the new Financial Services and Markets Act if the guidance the FSA plans to issue in the new year does not lead to the higher standards he wants to see.

He also promised to enact a key recommendation of last spring's Department of Trade and Industry investigation into Maxwell's activities, by producing guidance on the respective duties and responsibilities of advisers, and containing useful advice and examples of lessons that have been learned.

Sir Howard added: "Another of the key recommendations of the DTI report was the need to ensure that only fit and proper people manage regulated firms and that senior management has a firm grip on what is going on in the firm. Our regulatory approach for financial services firms should help head off 'Maxwell-type' behaviour in future."

The DTI inspectors concluded that Maxwell was "a bully and a domineering personality" who operated on the basis of "need to know", but could be charming on occasions.