Background
Who will be covered by the new rules?
What are the new rules?
When do the rules come into force?
Practical implications
The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have published long-anticipated new rules aimed at encouraging whistleblowing.
Following the 2008 financial crash, a review of the culture and professional standards of the sector was conducted by the Parliamentary Commission on Banking Standards. The new Senior Managers Regime, Certification Regime and Conduct Rules resulted from this review. The strengthening of the whistleblowing rules follows on from recommendations made by the commission in 2013.
Who will be covered by the new rules?
The new rules will apply to banks, building societies and credit unions (with more than £250 million in assets), PRA-designated investment firms and insurers subject to the EU Solvency II Directive. For smaller regulated firms, the rules will act as non-binding guidance.
Firms will need to appoint a senior manager or director to the role of 'whistleblowers' champion'. This individual will be responsible for managing the firm's internal whistleblowing policies and procedures and must report to the board annually about their operation.
Firms will also need to:
- establish and maintain an independent whistleblowing channel to manage all types of whistleblowing disclosure;
- insert wording into settlement and employment agreements which ensures that individuals are not deterred from making protected disclosure;
- inform the FCA if they lose an employment tribunal case against a whistleblower;
- inform UK staff about the FCA and PRA whistleblowing services; and
- require their appointed representatives and tied agents to inform their UK-based employees of the FCA whistleblowing services.
Guidance from the PRA suggests that firms should also consider whether better training could make their whistleblowing arrangements more effective.
When do the rules come into force?
The whistleblowers' champion will need to be appointed by March 7 2016.
The remaining rules come into force on September 7 2016, effectively giving the firm and the whistleblowers' champion six months to make any changes required to ensure compliance with the new rules.
These changes do not affect the underlying legislation on whistleblowing as set out in the Employment Rights Act 1996. However, by aiming to give both comfort and confidence to individuals, the new rules reflect the regulators' commitment to put mechanisms and protections in place to encourage a culture of reporting concerns and challenging poor behaviour. This is likely to lead to a growth in whistleblowing complaints raised within and against banks and other financial services institutions. In 2014/2015 the FCA reported an annual increase in whistleblowing disclosures of 28%; further increases seem likely in the coming years.
Although there is no positive obligation on individuals to blow the whistle – nor any financial incentives for doing so, as seen in other jurisdictions such as the United States – the uncapped damages available in successful claims have encouraged individuals to pursue whistleblowing allegations. However, it is often necessary to pursue internal avenues of complaint before blowing the whistle externally. Those bringing opportunistic claims may in future find it harder to explain why they never pursued a formal complaint before taking a claim to tribunal, given the greater protections now in place.
For further information on this topic please contact Colin Leckey or Emma Short at Lewis Silkin by telephone (+44 20 7074 8000?) or email ([email protected] or [email protected]). The Lewis Silkin website can be accessed at www.lewissilkinemployment.com/en-gb/.
