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Whistleblowing in the financial sector: new regulator’s proposals

The Financial Conduct Authority (“FCA”) and Prudential Regulatory Authority (“PRA”) published new proposals, designed to encourage and protect whistleblowers in financial sector firms . By Jillian Naylor, Linklaters Employment & Incentives partner.

These follow recommendations by the Parliamentary Commission on Banking Standards, as well as the recently published Francis Report on whistleblowing in the NHS. The proposals will apply to most financial firms and have a wider scope than the protections found in the Employment Rights Act 1996 (“ERA”). Breaches will be a matter of “regulatory concern”, but it is unclear precisely how the Regulators will enforce the new regime. Most staff, and all types of disclosures, will be protected. The new regime will apply to UK banks, building societies, credit unions with assets in excess of £25m, PRA-designated investment firms and insurers (“relevant firms”).

There are currently no proposals to extend the new regime to UK branches of foreign banks, although this could be reviewed in the future. The proposals cover a significantly wider group of individuals than ERA. In addition to employees and workers, non-executive directors, former employees, secondees, interns, volunteers, contractors, agents and employees of subsidiaries and competitors will also be included. And, doing away with the complex concept of “protected disclosures”, all disclosures become protectable – whatever their subject matter and however they are made.

Firms’ duties will go beyond established good practice, e.g. the adoption of whistleblowing procedures and the provision of access to a confidential helpline. Seeking to impose sector-wide standards, the Regulators set out very specific expectations that firms will: Inform all their UK-based employees of their right to blow the whistle to the Regulators (whether or not they made a disclosure internally) – and how to do this; Respect the confidentiality of whistleblowers and have specific measures to deal with anonymous disclosures; Assess and escalate whistleblowers’ concerns – including to the Regulators and/or to law enforcement agencies, as appropriate; Track the outcome of whistleblowing reports and the treatment of whistleblowers; Where appropriate, provide feedback to whistleblowers; Train staff, managers and the “whistleblowers’ champion”; Take all reasonable steps to ensure that no person under the firm’s control victimises whistleblowers and take appropriate measures against those who do victimise; and

Expressly clarify in employment contracts and settlement agreements that contractual confidentiality obligations do not prevent employees from making disclosures under ERA. Firms must appoint a Senior Manager “whistleblowers’ champion”. Firms will have to appoint a non-executive director Senior Management Function Holder (under the new Senior Managers and Senior Insurance Managers Regimes) as a “whistleblowers’ champion”. That person will be responsible for “ensuring and overseeing the integrity, independence and effectiveness of the firm’s policies and procedures on whistleblowing and for ensuring staff who raise concerns are protected from detrimental treatment.” The whistleblowers’ champion will also have to report annually and internally on the firm’s whistleblowing operations. And, if a firm loses an employment tribunal whistleblowing claim, the champion will be obliged to report this to the Regulators.

As firms will be subject to two parallel regimes co-ordination is vital. If the proposals are implemented, firms will have to “upgrade” their ERA-compliant procedures to comply with the Regulatory regime. Revising procedures, practices and training will go hand in hand with the appointment of a whistleblowers’ champion. It is likely that much of this will take place at the same time as the new Senior Managers and Senior Insurance Managers Regimes are implemented. As the Regulatory regime will sit alongside ERA’s, communication and co-ordination across various business units (e.g. internal audit/compliance, HR and business managers) will be vital. The added layer of personal accountability of a Senior Manager must also be considered and the individual discharging this role must have the necessary tools to ensure overall compliance. The consultation closes on 22 May 2015.

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