New rules from the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) place greater value on whistleblowing within the workplace. Whistleblowing is now being considered by many as an important element of a risk management strategy and can be a good corporate governance tool.
Under the new regime, large banks, insurers and building societies will need to go beyond the requirements of the Public Interest Disclosure Act 1998 (PIDA), a legislation that protects whistleblowers, and actively encourage employees to blow the whistle at work.1
The move is part of a suite of post-crisis reforms to tackle misconduct, illegal or dishonest activity and promote good practice within the financial services sectors. In the 2014-15 financial year, the FCA’s annual report revealed 1,340 whistleblowing cases, indicating insiders are becoming increasingly willing to speak out against wrongdoing. Prior to the financial crisis, whistleblowing languished at around 138 cases.2
- PRA-designated investment firms
- UK deposit takers with assets of £250m or more (including credit unions, banks and building societies)
- Insurance and reinsurance firms within the scope of Solvency II and the Society of Lloyd’s and managing agents
Key points of the new regime4:
- Firms will need to appoint a senior manager to oversee whistleblowing policies and procedures and present an annual whistleblowing report to the board.
- Internal arrangements must be in place to handle any type of disclosure by any person (including anonymous disclosures), not just those currently caught by PIDA. Concerns raised by individuals and the outcomes of any whistleblowing investigations must be recorded.
- Firms must inform UK-based employees (including their managers based abroad) about FCA and PRA whistleblowing services. Internal whistleblowing procedures must ensure the effective assessment and escalation of reportable concerns.
- Wording in settlement agreements and employment contracts should not deter employees from whistleblowing. Text in settlement agreements should explain the worker remains entitled to whistleblow even after leaving and signing a settlement agreement.
- Appropriate training should be given to UK-based employees, any overseas managers of UK-based staff and employees responsible for whistleblowing procedures
- Firms that lose an employment tribunal claim for whistleblowing must inform the FCA/PRA if the finding relates to a claim the whistleblower was victimised.
When does it take effect?
Firms must appoint and assign responsibilities to a whistleblowing champion by 7 March 2016, and be compliant with their new regulatory obligations by 7 September 20165.
For more information, read theFCA's Guidance on whisteblowing procedures
- http://www.lexology.com/library/detail.aspx?g=183f2a13-ab68-47af-8c49-d7fcc38b0587 / http://www.ft.com/cms/s/0/b3c4b27c-6c19-11e5-8171-ba1968cf791a.html#axzz3qhZ42DhC
Additional background reading: