New rules on whistleblowing- see our blog

New rules on whistleblowing- September 2016

If you work in the financial services sector, you may have heard the news that a new set of rules is in force in relation to whistleblowing.

As you may be aware, whistleblowing occurs when an employee makes a disclosure to a prescribed person, which relates to some form of wrongdoing and falls within the public interest. In order to claim protection, an employee would have to prove the following:

  1. That they made a qualifying disclosure and had a reasonable belief in doing so;
  2. That they followed the correct disclosure procedure; and
  3. That they were dismissed or suffered a detriment as a result of making the disclosure.

Following the seismic changes caused by the banking collapse in 2008, the financial services industry was under a great deal of pressure to ensure that employees felt able to make disclosures, if they knew or suspected that wrongdoing was taking place.

In 2015, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) introduced new rules which were designed to strengthen the protections afforded by the whistleblowing legislation. These sanctions apply to all UK-incorporated banks, building societies, credit unions and investment banks and came into effect on the 7th of September 2016.

So what do the changes actually mean?

The changes set out the requirement that each financial services company would have to nominate a ‘whistleblower champion’ i.e. a regulated senior manager who would create and enforce updated policies and procedures for whistleblowing (which have been created in line with the rules).  The senior managers will then be under a duty to highlight the changes to their employees, so that they are made aware of their rights.

Companies can still retain their internal whistleblowing policies, but they must be updated to reflect the fact that the new rules allow an employee to approach a regulator directly, rather than having to make the disclosure to someone internally in the first instance.

The FCA and the PRA will also set prescribed responsibilities, which would be allocated between the senior managers and enshrined in a statement. These responsibilities would involve ensuring and overseeing integrity, independence and effectiveness in accordance with the rules.

The senior manager would be under a further duty to prepare and/or oversee the preparation of an annual whistleblowing report, which they would have to present to the board. This report should set out their findings on the operation and effectiveness of the systems put in place, in line with the responsibilities mentioned above.

While employees do not have to blow the whistle, if they choose to do so, the law is designed to protect them from unfavourable treatment in association with this disclosure. The focus of these changes appears to be creating an open atmosphere, where an employee feels comfortable enough to make these disclosures, while knowing that there is a process in place to support them.

As a result, this protection now also extends to the way settlement agreements are drafted. Where an employee has permission under the FCA or PRA to carry out ‘Regulated Activities’, the following clause will be mandatory in any settlement agreement they are offered:

“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. This includes protected disclosures made about matters previously disclosed to another recipient.”

In the event that a whistleblowing claim is taken to the employment tribunal and is found to be successful, the company will be under an obligation to inform the FCA.

How much impact could these changes have?

These rules are likely to add an extra set of burdens to the affected companies, with the risk being that many will simply follow the rules on face value to comply with the obligations, rather than attempting to improve the environment for an employee thinking of making a protected disclosure.

In any case, the statistics demonstrate that over the past year, whistleblowing claims have dropped by almost 20% which shows that employees clearly are not comfortable making these disclosures despite the employment protection that already exists.

Only time will tell how much these recent changes will impact whistleblowing claims in reality, but it is clear is that this will depend hugely on whether the changes will first impact the anti-whistleblowing culture in the financial services industry.

Sanya Masood, Associate Solicitor

Landau Law

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