How a firm deals with complaint handling and “whistleblower” reporting remains an ongoing challenge for directors, executives and the in-house counsel who advise them. Increasingly, firms are expected to create a safe environment for employees, suppliers, contractors and customers who report potential misdeeds, and to appropriately and effectively address relevant information received. Managing these disclosure programs often falls to compliance officers and legal counsel in regulated industries, as part of their ongoing and frontline role in promoting a “culture of compliance” within the workplace.
The UK’s Financial Conduct Authority is the most recent regulatory authority to impose explicit requirements on its regulated entities, reflecting expectations that whistleblowing will be encouraged and whistleblowers will be protected when they come forward. On October 6, 2015, the FCA released new rules to protect whistleblowers in the banking and insurance industry. Specifically, the whistleblower rules apply to designated investment firms, regulated insurance companies and deposit-takers (such as banks) with over £250 million (approx. $500 million) in assets. For other firms, the FCA has indicated that the rules are “non-binding guidance”.
Among other things, the new rules require a bank or insurance company to:
- appoint a senior person to be the whistleblowers’ champion
- put in place internal whistleblowing arrangements to allow employees to raise concerns
- put text in settlement agreements explaining that workers have a legal right to “blow the whistle”
- tell UK-based employees about the FCA and PRA whistleblowing services
- present a report on whistleblowing to the board at least annually
The FCA has stated that these rules, which are to take full effect in September 2016, are designed to build-on and formalize examples of good practice already found in the financial industry.
Canada does not an equivalent set of whistleblower rules which apply specifically to the banking and insurance industry. The Criminal Code generally prohibits retaliation or intimidation by an employer against a whistleblowing employee, and there is legislation which protects public servants and puts in place a disclosure process in the federal public sector. The Competition Act also includes protections and incentives for whistleblower who report potential competition law violations to the Competition Bureau.
The OSC is currently considering a whistleblower program for the securities industry, which goes further than merely requiring firms to establish their own regime within regulated firms. As commented previously, the proposal includes cash payments to persons who provide useful information directly to the regulator, even if they have bypassed a firm’s own internal complaint handling/whistleblower regime. We have previously noted that such a regime, like the one established and administered by the Office of the Whistleblower of the U.S. Securities and Exchange Commission, raises unique challenges for those responsible for programs internal to regulated firms.