Does Your Whistleblowing Policy Comply with the New Rules?

A new whistleblowing regime comes into effect from 7 September 2016 for firms regulated by the Financial Conduct Authority (FCA). In recent years the FCA has reviewed its whistleblowing procedures and taken steps to encourage the practice. The new rules and guidance will hopefully encourage employees to challenge wrongdoing and speak up.

The new regime aims to formalise good practice already found in the financial services sector. It will obligate firms to make arrangements for all kinds of whistleblowing disclosures from all types of employee. Firms will need to appoint a whistleblowers’ champion, present a whistleblowing report to the board annually, inform the FCA if the firm loses a tribunal against a whistleblower, and inform UK employees of the whistleblowing services of the FCA and Prudential Regulation Authority (PRA).

The rules will affect the following:

• deposit-takers with assets over £250 million;
• PRA-designated investment firms;
• insurance and reinsurance firms within the scope of Solvency II; and
• the Society of Lloyd’s and managing agents.

The rules will be ‘non-binding’ guidance for all other firms, who may wish to comply voluntarily. It’s important to remember that whistleblowers are vital in identifying wrongdoing and poor practice, so it should be easy for them to come forward and speak up. It is in the interests of the industry as a whole that regulators become aware of malpractice, and whistleblowers are crucial for this. Complying with the new rules would be prudent.

Many whistleblowers in the financial sector are reluctant to come forward for fear of being reprimanded or suffering personally. Confidentiality is therefore important in making whistleblowers feel at ease, but they need to have the confidence to speak to their employers in the first place. Having a company culture that facilitates and encourages whistleblowing will go a long way in making sure your board and the regulators are alerted to wrongdoing.

Whistleblowing Arrangements

Firms will need to implement and maintain effective arrangements for all types of whistleblowing disclosures including those that are anonymous. The arrangements should ensure proper assessment of each case and escalation to the FCA and PRA where appropriate. While not all cases will need to be escalated, you should examine each disclosure on a case-by-case and keep records of action taken. The arrangements should also prevent whistleblowers from victimisation. Confidentiality is paramount.

You should have already appointed a whistleblowers’ champion who is responsible for overseeing disclosures and ensuring that correct procedures are followed to maintain ‘integrity, independence and effectiveness’. The champion should also prepare an annual report for the board although this is only mandatory for the types of firms listed above. The FCA has outlined the need for the whistleblowers’ champion to be a senior manager or director who has access to independent legal advice and training, and is an authority figure within the firm. The champion can be based overseas providing they can accurately carry out the role. Your whistleblowers’ champion should now be in the process of overseeing the arrangements your firm is putting in place for when the new regime comes into force from September.

The annual report required by relevant firms should be made available to the FCS and PRA on request, but it will not be made public. Your report should contain information on any employment tribunals involving whistleblowers which your firm lost.

The rules also require firms to expressly indicate workers’ rights in settlement agreements so as not to deter staff from whistleblowing. Furthermore, firms are prohibited from asking employees to confirm if they know of any information which could form the basis of a disclosure or state whether they have made a protected disclosure.

While the FCA recognises that whistleblowing good practice exists already within the financial sector, with these new rules and guidance the FCA hopes firms will review their whistleblowing policies and procedures and adjust them accordingly, so that a whistleblowing culture is encouraged, and employees are not discouraged from challenging wrongdoing and speaking out.

If you would like further information on the new whistleblowing rules and guidance visit the FCA website here 

If you would like advice or assistance in ensuring your whistleblowing policies and procedures comply with the new guidance, we would be happy to help. Contact us at info@bhcsecretaries.co.uk