In October 2015 the UK regulators, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), released new whistleblowing rules for certain regulated entities in the UK (the New Rules). The New Rules impose obligations on these entities in addition to the requirements of existing whistleblowing legislation found in the Public Interest Disclosure Act 1998 (PIDA) and the Employment Rights Act 1996 (ERA). Whilst they have until 7 September 2016 to comply with most of the requirements of the New Rules, 7 March 2016 was the deadline for the appointment of a whistleblowers’ champion.
The New Rules will apply to UK regulated banks, building societies and credit unions with total gross assets exceeding £250 million, PRA designated investment firms, and insurance and re-insurance firms regulated by the PRA. In relation to other regulated entities, the New Rules will act as non-binding guidance.
- The whistleblowers’ champion
With effect from 7 March 2016 the relevant entities were required to appoint a “whistleblowers’ champion”. This is a non-executive director who is a Senior Manager subject to the Senior Managers’ Regime or the Senior Insurance Managers’ Regime and who takes on the prescribed responsibility for whistleblowing. Where there are no non-executive directors, the whistleblowers’ champion should be an appropriate Senior Manager.
As part of the role, the whistleblowers’ champion must oversee the preparation of an annual report to the entity’s board (which will also be available to the regulator, but not the public at large) addressing the operation and effectiveness of the whistleblowing system.
- Changes to internal whistleblowing arrangements
The New Rules require relevant entities to have internal procedures in place that reassure staff that they can raise concerns and will be listened to without detriment to themselves in their employment.
- Extensions of scope
The New Rules extend the types of disclosures which should be covered by internal whistleblowing arrangements beyond those matters identified as “qualifying disclosures” in section 43 ERA. This extended scope will cover a failure to comply with policies and procedures, and the extremely broad concept of any behaviour that harms, or is likely to harm, the entity’s reputation or financial well-being.
The New Rules also require that the internal arrangements cover disclosures by any person, not just persons who would fall within the definition of “worker” in Section 43K ERA (being the category of persons who are protected against detriment by PIDA and the ERA).
- Settlement agreements
The New Rules require that relevant entities include language in settlement agreements rendering void any provision between a worker and employer which purports to prevent a worker from making a protected disclosure.
- Informing the regulators
As well as making available to the regulators the annual report referred to above, entities are required to report promptly to the FCA each case the firm contested but lost at tribunal where the claimant successfully based all or part of their claim on the fact that they had suffered a detriment as a result of making a protected disclosure or had been unfairly dismissed under section 103A ERA.
- FCA and PRA whistleblowing services
All employees of affected entities who are based in the UK, should be informed about the whistleblowing services provided by the PRA and the FCA, including how to contact them, the protections they offer and the kinds of disclosures it would be appropriate to make. Entities should also inform such employees in a policy document that they can make disclosures to the regulators at any stage, regardless of whether they have raised concern internally first.
Practical issues for affected entities
The New Rules are likely to represent a significant change for affected entities and could result in an increase in the number of “whistleblowing” disclosures received. A “whistleblowers’ champion” should have already been appointed who will take on the responsibility for ensuring compliance with the New Rules.
Entities will also need to review and update their whistleblowing policies to accommodate the New Rules and provide training for employees, including those who will be responsible for administering and implementing the New Rules and the whistleblowers’ champion.