The role of the whistleblowers’ champion comes into effect on 7 March 2016 and firms have until 7 September 2016 to implement the FCA’s new whistleblowing rules, details of which were published in October 2015. What practical steps should firms be taking now to get ready for the new regime?
Consider the meaning of ‘whistleblowing’
Many firms have whistleblowing policies which track the definition of ‘whistleblowing’ contained in the UK’s employment legislation. Legal and HR teams understand the potential risk of whistleblowing claims in the employment tribunal and their view of what constitutes whistleblowing might, inevitably, be influenced by that understanding.
The meaning of whistleblowing in the employment legislation is unchanged, but the new regime being introduced by the FCA requires firms to think more widely. To embed the culture the FCA is hoping to achieve, firms will need to remember that there is a distinction between the types of disclosure which would qualify someone for protection under employment law, and the wider types of disclosure which the FCA wants to encourage people to make.
There are two key points:
- Firms must ensure that their whistleblowing arrangements can handle any type of disclosure. The FCA requires that there are appropriate escalation routes for “reportable concerns”. This includes any concern about the activities of the firm and potentially goes much wider than the type of concern that will trigger protection under employment legislation.
- The FCA also requires each firm’s whistleblowing arrangements to be capable of receiving disclosures from any person, not just the firm’s employees. Again, this is wider than the category of individuals who might benefit from protection under the employment legislation.
In practice, this might mean revising whistleblowing policies to ensure that they are not drawn too narrowly and capture all potential disclosures by all potential whistleblowers, regardless of the fact that not all of the people or disclosures covered by the policy would fall within the scope of employment protection.
Do firms need to change the way they handle reported concerns?
Often, complaints that come into a firm’s whistleblowing hotline or which otherwise come to a firm’s attention are dealt with in different ways depending on their subject matter. For example, complaints that are personal to an individual may be dealt with via the firm’s grievance process, reports of other employees’ personal conduct may be dealt with by HR through a disciplinary or harassment process and complaints relating to compliance or regulatory issues may be handled by the compliance or legal teams.
The FCA recognised in its October 2015 policy statement that a variety of escalation routes may be appropriate for complaints received by firms. The current multi-route approach can therefore remain the same. However, the FCA emphasised the importance of whistleblowing for bringing those concerns to firms’ attention in the first place, and stressed that firms must ensure “effective assessment and escalation” of any concern. This means that, although firms can continue to apply different processes to complaints depending on their subject matter, it will be important to be able to articulate the reason for directing a complaint down a particular route. This might look something like this:
- all complaints that are received, whether by managers, HR, a whistleblowing hotline or compliance, are reported to a central ‘triage’ team or individual;
- the ‘triage’ team considers the subject matter of the complaint, along with any recommendation as to how it should be dealt with, and confirms the route that should be followed; and
- the complaint is investigated and addressed appropriately, and the outcome is recorded.
Recording the thought process behind how a complaint is dealt with will be particularly important in light of the requirement for firms to inform the FCA if they lose an employment tribunal case with a whistleblower. Many whistleblowing claims relate to issues that are personal to an employee (notwithstanding the “public interest” element that has been introduced to the definition of whistleblowing in the employment legislation). The employee’s underlying complaint may therefore have been dealt with via a grievance process, or they may have raised no complaint at all until after they were dismissed. Being able to articulate the reasons for choosing a particular process for handling any complaint, or showing that no complaint was raised, will assist a firm in responding to any questions from the FCA about the subsequent employment tribunal case. The FCA will regard as a serious matter any evidence that a firm has acted to the detriment of a whistleblower – this could call into question the fitness and propriety of the firm or particular individuals and could affect the firm’s continuing satisfaction of the threshold condition 5 (suitability) or the status of an approved person or certified employee. Evidence demonstrating a clear and appropriate escalation process will be a helpful line of defence.
Does whistleblowing need to be recorded differently?
Firms vary in the approach they take to recording incidents of whistleblowing, and in the threshold they apply for determining whether a complaint constitutes whistleblowing in the first place. As explained above, firms will need to broaden their understanding of ‘whistleblowing’ in light of the scope of the FCA’s requirements. Having done so, it would also be prudent to record all incidents that may constitute whistleblowing under this broader definition. This is important for two reasons:
- it can help with the exercise referred to above of demonstrating effective assessment and escalation of all complaints; and
- it will assist in the preparation of the annual whistleblowing report that must be presented by the whistleblowers’ champion to the board.
Applying the ‘whistleblowing’ label to a wider range of complaints and keeping a log of those complaints may seem counterintuitive to firms which are seeking to demonstrate that there are no grounds for concern within their business. However, the FCA’s approach to whistleblowing demonstrates its focus on a ‘speak-up’ culture and the importance of employees (and others) feeling able to raise concerns. Keeping a log which tracks the situations in which employees have felt comfortable raising any concerns will be helpful in demonstrating that firms have achieved the desired culture.
Will more incidents have to be reported to the regulator?
Broadening the definition of whistleblowing by which firms operate and keeping a fuller record of complaints does not necessarily mean reporting more incidents to the regulator. The question will remain whether a reported incident calls into question a person’s fitness and propriety and this assessment will be unchanged by better record-keeping and a more inclusive approach to recording reported concerns.
What help will the whistleblowers’ champion need?
Part of the role of the whistleblowers’ champion involves overseeing the implementation of the new whistleblowing regime, ready for its effective date of 7 September 2016. In practice, this will mean educating the whistleblowers’ champion on the arrangements that are currently in place for reporting concerns, the process that is followed when concerns are raised and the safeguards that are in place to prevent victimisation of whistleblowers. Only then can suggestions be made for how those processes and procedures might be improved.
If, as in most cases, the whistleblowers’ champion is a non-executive director, they will be slightly removed from the day to day operational side of the business. This means that they are likely to look to others within the business to keep them informed about how the whistleblowing arrangements are working and what improvements might need to be made. Although firms’ primary objective will be appointing a whistleblowers’ champion, they will also need to give careful thought to the person within the business who will be appointed as the key contact point for the champion – this is most likely to be a senior individual in HR, legal or compliance. While responsibility for ensuring the effectiveness of a firm’s whistleblowing arrangements will rest with the whistleblowers’ champion, the contact person for the champion will play a critical role in helping them to discharge that responsibility.