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Getting to grips with more stringent whistleblower rules

The protections afforded to whistleblowers continue to be a key priority for the FCA, with new guidance published setting out its minimum standards and examples of best practice.

Finance professionals should take time now to ensure their internal policies do not fall foul of the guidance. Employers need to be confident their investigation processes are up to scratch and that they are adopting a robust and consistent approach to dealing with concerns.

If firms do not undertake this exercise now, they run the risk of falling victim to regulatory enforcement action, including substantial fines.

Why firms must get the whistleblowing balance right

Employers have long been aware of the importance of offering adequate protection and support to whistleblowers. Nevertheless, the newly-published guidance is to be commended for offering clarity on the steps firms should take.

Firms are now required to do the following as a minimum:

  • Appoint a whistleblowers’ champion to ensure senior management oversight of the integrity, independence and effectiveness of the firm’s arrangements
  • Implement clear guidance on preventing retaliation against those who blow the whistle
  • Provide investigators with guidance on how to protect a whistleblower’s confidentiality and how to assess the seriousness of whistleblowing reports
  • Make clear to staff that raising a concern with the FCA/PRA is not conditional on a report first being made using the firm’s internal arrangements
  • Prepare a report (at least annually) to the firm’s governing body on the operation and effectiveness of its whistleblowing systems and controls. This report needs to maintain the confidentiality of individual whistleblowers but should comment on any discernible trends, staff awareness of whistleblowing processes and the overall volume of reports made through whistleblowing reporting channels.

The FCA has also highlighted the following as examples of good whistleblowing practice:

  • Proactively updating whistleblowers about action being taken following a report being made (although the FCA recognises there may be limits on the information that can be provided)
  • Non-executive directors being appointed as whistleblowers’ champions
  • Whistleblowing training being provided separately to managers and investigators, and to senior leadership teams involved in the assessment of cases
  • Monitoring employment records to identify any potential whistleblowing detriment (e.g. performance appraisals or bonus decisions).

These examples offer useful advice to employers seeking to ensure their policies are FCA compliant. Unfortunately, though, not all the changes are as welcome.

The guidance does not offer any comfort to firms struggling to strike the careful balance between ensuring their whistleblowing policies and procedures are FCA compliant and avoiding claims from employees made in bad faith.

Further, the FCA has now imposed tougher reporting requirements on firms, including an obligation to inform it where one loses a whistleblowing claim at the employment tribunal. Employment litigation is already complex and deep in technicalities, and it is likely there will be a substantial number of firms unknowingly breaking FCA guidelines in this respect.

FCA under fire for failing to track consumer outcomes

The new reporting obligation where claims are not successfully defended further raises the stakes of whistleblowing litigation.

The protection offered to whistleblowers is already significantly wider than that offered in other areas of employment law. The law was designed to protect individuals raising concerns genuinely in the public interest. It was introduced in recognition of shortcomings identified in national disasters such as Piper Alpha, the Herald Free Enterprise and the King Cross fire.

The statute implementing the changes into employment law is called The Public Interest Disclosure Act and the name of the law gives a clear indication as to how it was intended to apply. However, in practice the current law is so broad it can protect an individual raising concerns which only affect a small group of individuals or even just themselves.

This could include an individual who raises concerns about what many would consider to be entirely private matters, such as performance reviews, HR policies and procedures, bonus decisions and dismissals.

Unlike other employment rights, there is no minimum service period before a whistleblowing claim can be brought before the employment tribunal. Crucially, there is also no requirement for a disclosure to be made in good faith, which means one made with the motive of pressuring the employer not to dismiss, or to offer enhanced severance on an exit, is still protected.

It is therefore all too easy for disenchanted employees to abuse the system to strengthen their hand in employment negotiations.

Now more than ever there is a need to ensure adequate whistleblowing protection is in place to avoid unmeritorious claims and hefty fines. To minimise this risk, firms must ensure staff have clear guidance on how to raise and deal with whistleblowing claims confidentially and should also pay close attention to the updated reporting obligations.

David Ashmore is a whistleblowing expert and employment partner at global law firm Reed Smith

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 5th April 2019 at 5:53 pm

    These extra layers of rules, guidelines, processes, procedures, reporting requirements and all that malarky are all very well (well, not actually) but they seem to be focussed entirely on encouraging employees to report bad practices within the firms for which they work, whilst at the same time totally ignoring any encouragement or protections to those who know of bad practices in other firms.

    The FCA might well have prevented numerous train wrecks had it bothered to take a scrap of notice of advisers who’ve reported malpractices in other firms.

    If this is something in which the FCA simply isn’t interested or considers unimportant (I can’t imagine why), perhaps it could publicise the fact so that when one firm becomes aware of another engaged in dodgy practices, it’ll know not to waste its time reporting them to the regulator.

    • I think regulators do listen to people who report concerns about third parties, but “whistleblowing” has a specific meaning and shouldn’t be conflated with “industry intelligence”.

  2. To what body should employees of the FCA report concerns?

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