Financial service companies in the UK may soon face the prospect of remodelling their whistleblowing procedures and nominating whistleblowing champions.

The Public Interest Disclosure Act 1998 (PIDA) currently protects employees from suffering a detriment, or being dismissed, as a result of blowing the whistle in certain circumstances. Employees may receive compensation if they bring a successful claim in the Employment Tribunal in respect of such treatment. However, there is not currently any legal or regulatory duty on employers to have whistleblowing arrangements in place. The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)— the bodies charged with financial regulation in the UK—have published a joint consultation paper about formalising whistleblowing procedures in UK banks, building societies, credit unions with over £25 million of assets, PRA investment firms and insurers. This is anticipated to be approximately 1,500 firms in total.

The proposed measures include:

  • Introducing written internal whistleblowing arrangements and informing employees of this;
  • Informing employees that they can blow the whistle to the FCA or PRA directly;
  • Offering protection to all whistleblowers whatever their relationship to the organisation and whatever the topic of their disclosure, even if they do not qualify for protection under PIDA;
  • Including provisions in new employment contracts and settlement agreements assuring employees that nothing in the contract or agreement prevents them from making a protected disclosure under PIDA; and
  • Appointing a "whistleblowers' champion" (who should be a non-executive director and senior manager) to oversee the effectiveness of internal whistleblowing arrangements, prepare an annual report to the board and report any Tribunal findings in favor of a whistleblower to the FCA.

The PRA and FCA aim to encourage employees to blow the whistle where they suspect wrongdoing, and to encourage employers to protect whistleblowers and escalate their concerns when appropriate. They do not however propose to place a regulatory duty on employees to make whistleblowing disclosures.

The proposals endorse whistleblowing procedures on a much larger scale than the existing PIDA framework, suggesting protection for more categories of individuals, regardless of the nature of their concern.

Although the proposals are at consultation stage only, it appears likely that they will be implemented. The deadline for responses was May 22, 2015, and the FCA intends to consult on whether to apply similar mechanisms to other regulated firms (including smaller credit unions) at a later date. The FCA and PRA may also consult on applying any new requirements to UK branches of overseas banks.

Comment

Some firms will already comply with these proposals, but for many, these proposals would require substantial changes, and almost all firms would need to make some changes to comply. According to the FCA and PRA, the initial costs for the largest firms (10,000+ staff) are expected to be up to £280,000 per annum, plus a one-off set up cost of £70,000.

Due to the requirement for a whistleblowers' champion (at the non-executive director level) with a duty to report to the board, and a duty to report to the FCA in respect of litigation, if these proposals are implemented, whistleblowing is likely to become a board level issue for all covered employers.