The 7 September 2016 will see UK regulators implement new whistleblowing rules and guidance for certain businesses in the financial services sector. The new rules, introduced by the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA), will apply to UK deposit takers with assets of £250m or greater including banks, building societies and credit unions, PRA designated investment firms, Solvency II insurance and reinsurance businesses, the Society of Lloyd’s and managing agents. The rules will have the status of “non-binding guidance” to all other firms regulated by the FCA. Rules will require businesses to implement internal whistleblowing procedures allowing employees to raise concerns about wrongdoing and poor practice; to present a ‘whistleblowing report’ to the board on an annual basis; and ensure UK-based employees are aware of the regulators’ own whistleblowing services as a separate means of raising concerns. Legislative protection for whistleblowers in the UK already exists, which allows an employment tribunal to award unlimited compensation for those victimized for disclosing wrongdoing. However, these decisions will now have to be reported directly to the PRA. A further requirement in the rules to appoint a ‘whistleblowing champion’ was implemented as part of previous initiatives to reform senior management arrangements and remuneration. Whilst UK branches of overseas banks are not yet required to implement the rules, this could change in the future. The rules could also be expanded to include other types of financial services firms.

The rules do not allow regulators to pay whistleblowers for information. In this respect at least they differ from those operated in the US by the SEC for the limited class of individuals whose information leads directly to successful enforcement action. Whilst financial incentives were considered by the PRA in 2014 it was felt that, amongst other reasons, there was a lack of empirical evidence that they increased the number and/or quality of disclosures received by regulators.

D&O insurers of UK businesses affected might anticipate that greater employee awareness of whistleblowing will increase claims activity. Whilst many businesses will already have existing policies and procedures in place, insurers may want to consider how certain policy provisions could be interpreted when the new rules come into effect. These will include scope of cover clauses relating to the costs of internal investigations and whether exclusions for “fraud” or “deliberate misconduct” might be triggered if employees make admissions of misconduct to regulators.