17 March 2015

Whistleblowing in PRA-designated investment firms and insurers: new proposals

Whistleblowing is a hot topic for all employers. For insurers regulated by the Prudential Regulation Authority (“PRA”), deposit-takers and PRA-designated investment firms in particular, it looks set to stay high up the agenda, after a new consultation was announced by the PRA and Financial Conduct Authority (“FCA”) on 23 February.

The legislation to protect whistleblowers - those who, in the public interest, make disclosures of certain types of failure or misdemeanours - from detriment in the employment context has been in place since 1998. Yet scandals in the financial sector have deepened concerns that such disclosures are often swept under the carpet when raised by employees, rather than taken seriously and addressed by management. In the wake of the financial crisis, the Parliamentary Commission on Banking Standards demanded action from the industry and the PRA / FCA consultation is part of the joint regulator's response.

Key proposals

Key proposals in the consultation would require such firms to:

  • Include a section in new employment contracts and settlement agreements clarifying that nothing prevents an employee from making a “whistleblowing" disclosure.
  • Appoint a “whistleblowers’ champion” who would be responsible for ensuring the integrity, independence and effectiveness of the firm's policies, including protecting staff who blow the whistle from detrimental treatment.
  • Put measures in place to reassure employees that they can raise concerns and be listened to. These would include requiring firms to have written whistleblowing procedures and to track the outcome of instances of whistleblowing, including what happens to the whistleblower themselves, to guard against retaliation.
  • Inform the regulator in the event that a whistleblower is found to have suffered a detriment by an employment tribunal.

What should firms be doing in response? 

There is no immediate deadline for action as the proposals are at consultation stage, and many firms will already have written whistleblowing procedures in place. However, in all likelihood, the proposals will be implemented at least to some degree. The consultation paper is therefore an early warning to firms to prepare to put these measures in place.

The amendments to employment contracts and settlement agreements should not cause much difficulty. However firms may find that appointing a "whistleblowing champion” proves much more contentious. Taken in conjunction with the move towards greater individual accountability under the new Senior Managers Regime, champions will be taking on a highly exposed position where they are responsible for protecting whistleblowers, at times against the wishes of some parts of management, no doubt. 

In reality, this role could bring the champion into direct conflict with senior colleagues if any whistleblowing allegation proves founded. The consultation paper emphasises that the champion must have sufficient authority and independence to carry out their role. The list of suitable candidates is likely to be fairly short in most organisations, which may make the post difficult to fill. Streetwise disgruntled employees may try to draw the champion into their own employment disputes, to bring the firm’s whistleblowing procedures into the spotlight, and to raise the stakes and force a higher settlement.

And what if the champion becomes a disgruntled employee? The role of champion may add a whole arsenal to his or her weaponry of employment law rights, particularly if there is any evidence it played a part in the champion’s own dismissal or fall from favour. The choice of champion, from a narrow field, looks likely to be key in making this proposal work for firms. Applications from experienced tightrope walkers welcomed.

If introduced, these measures are likely to be rolled out across the sector in due course. The FCA intends to consult in future on whether to require similar whistleblowing measures within other firms under its regulation, including smaller credit unions (with assets of £25M or less), which are not currently included in the proposals.

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