The Financial Conduct Authority (‘FCA') and the Prudential Regulation Authority (‘PRA'), place a high priority on protecting whistleblowers from detrimental treatment. In recent years, the regulators have broadened their expectations regarding how firms should approach whistleblowing complaints. For this reason, it is important for firms to regularly review their existing whistleblowing policies to ensure that they reflect current regulatory expectations.
With this in mind, it is time your organisation took a look again at your current policy? Below we set out some important practical points to consider when performing a whistleblowing policy review.
1. Identifying Whistleblowing
Under the Public Interest Disclosure Act 1998 (‘PIDA'), to be protected from detriment, a whistleblower must make a disclosure of information that they reasonably believe to show the existence of a specific wrongdoing which does not fall under one of the exempted categories, and this must be disclosed to a listed category. It can be seen, therefore, that under PIDA, there is a high bar for a disclosure to qualify as whistleblowing.
The FCA's definition of a ‘Whistleblower' covers ‘any person that has disclosed, or intends to disclose, a reportable concern'. The definition of a ‘reportable concern' covers a protected disclosure but also goes further to include ‘a concern held by any person in relation to the activities of the firm.' This will, therefore, include a breach of the firm's policies and procedures, as well as behaviour that harms or is likely to harm the reputation or financial well-being of the firm.
Clearly, the regulators' definition is broader than the statutory definition and with the FCA making clear that ‘non-financial misconduct', such as harassment and bullying, may also serve to breach regulatory rules, the difference in breadth looks set to continue to increase. For this reason, it is important for firms to ensure that their whistleblowing policies are sufficient to cover both statutory and regulatory definitions, to ensure that those falling under the broader regulatory definition are identified as whistleblowing complaints and dealt with accordingly.
2. Keeping Policies and Procedures up to Date
Before considering the regulators' broadening expectations, it is important for firms to ensure that their whistleblowing policies meet the core regulatory requirements as contained in the FCA Handbook and PRA Rulebook.
For example, the FCA Handbook requires firms to establish, implement and maintain effective procedures for whistleblowing disclosures. These procedures must be effective in handling the whistleblower's requests for confidentiality and anonymity, as well as preventing victimisation resulting from blowing the whistle (SYSC 18.3.1R). Additionally, policies must also reflect the FCA's prohibition of firms from entering into a settlement agreement with potential whistleblowers to prevent them from blowing the whistle (SYSC 18.5.1R).
Further, firms must also provide whistleblowing training to UK based employees and their managers, whether based in the UK or not, as well as those responsible for the firm's whistleblowing arrangements. The training must include specific components such as how to recognise whistleblowing (SYSC 18.3.4G). With the recent broadening of the FCA's expectations regarding what may be considered whistleblowing, it is important for firms to consider whether their current whistleblowing training is sufficiently reflective of the current regulatory climate.
3. Notifying the Regulators of Whistleblowing
Where a firm has contested a whistleblowing claim and lost at the Employment Tribunal, where part, or all, of the claim was based upon detriment suffered as after making a protected disclosure or unfair dismissal, the FCA requires that this is reported to them promptly. To this end, it is important to review whistleblowing policies to make sure that they contain appropriate procedures to ensure prompt reporting in such situations and avoid action from the regulator.
4. Preventing Conflicts of Interest in Investigation
There are two main ways in which a conflict of interest may arise during the investigation of a whistleblowing complaint. Clearly, there is the potential for the person appointed to undertake the whistleblowing investigation to be implicated in the complaint when further information comes to light. Understandably, this is not an uncommon scenario and a firm's whistleblowing policy should have the necessary structures in place to remove and replace the implicated investigator in such an eventuality.
However, the FCA is now also increasing it focus upon situations where a firm's performance management and remuneration structures may provide an incentive to those who are responsible for dealing with whistleblowing complaints to make what it calls ‘wrong' decisions. For this reason, firms should also consider whether its performance management and remuneration structures have the potential to lead to a conflict of interest when considering the suitability of its whistleblowing policy.
5. Analysing the Causes of Whistleblowing
Both the FCA and PRA place importance on individual firms' ability to respond to issues raised and prevent them from occurring again in the future. Further, the FCA has an expectation that firms monitor any complaints from individual whistleblowers about the whistleblowing process or its outcomes, as this will allow the identification and rectification of any emerging trends.
For this reason, the specific members of senior management responsible for the firm's whistleblowing framework should monitor whistleblower complaints and ensure measurable action in order show that they are discharging their responsibilities effectively. Indeed, doing so will serve to maximise the strength of the firm's position should the regulator choose to investigate any whistleblower complaints.
6. Creating a Culture of Psychological Safety
In recent years, the FCA has made clear that it is no longer simply sufficient for firms to ensure that there is a robust framework for dealing with whistleblowing and they must also now take active steps to create a culture of ‘psychological safety'. Indeed, the FCA and PRA agree that without such a culture, employees may remain reluctant to speak up regarding any concerns they have. For this reason, whistleblowing policies that were sufficient to meet the regulatory climate when drafted may now fall short of the FCA's current requirements.
When considering the suitability of current whistleblowing policies, firms should first consider whether they have set in place a sufficiently robust whistleblowing framework. Having done so, firms should look further to consider whether their culture is one in which employees are comfortable to raise concerns, with confidence of being listened to seriously, before resorting to whistleblowing. To this end, firms should consider performing an organsiation wide cultural review and carrying out an employee survey on firm culture to establish any areas for improvement regarding the firm's psychological safety.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
