Blog : BOARD TALK
|Posted on December 16, 2015 at 12:20 PM|
Andrew Yule, Partner in Employment Law at Winckworth Sherwood, the London-based law firm.
Boards need To Pay Attention To New Role: 'Whistleblowing Champion'
"From 7 March 2016, many non-executive directors of UK financial services firms will be taking on a new, mandatory role – as their firm’s Whistleblowers’ Champion.
The requirement for this designated role is part of a package of measures introduced by the UK regulators (the Financial Conduct Authority or FCA and the Prudential Regulation Authority or PRA) ), aimed at encouraging transparency and improving how financial services firms handle concerns raised about their activities.
Most firms will already have a whistleblowing policy. In light of the new rules, this policy will need a wholesale review just to meet the letter of new regulatory criteria. But that alone will not be enough.
At their heart, the new rules aim to lift whistleblowing above being just a compliance or policy issue – and instead to engrain a deeper, cultural change within firms. Five key strands within the new rules are designed to achieve this and will need very careful thought.
From September 2016 firms must:
1. Establish policies and internal arrangements that handle not just concerns about possible legal or regulatory breaches (classic ‘whistleblowing’, but also any other “reportable concerns”. “Reportable concerns” is a new and very wide concept, defined within the rules and which goes beyond what one might traditionally think of as ‘whistleblowing’; it encompasses any concern about a breach of a firm’s policies or procedures or ‘any behaviour that harms or is likely to harm the reputation or financial well-being of the firm’. The aim is to encourage a wider group of individuals to air any concerns they may have, within a structured and supportive environment, so diluting the fear of stigma that can come with being labelled a ‘whistleblower’;
2. Present a report on whistleblowing to the board, at least annually. Whilst firms may be cautious about creating documentary evidence of each and every concern, it would be prudent to include a record of all incidents that may fall within the wider definition of ‘reportable concerns’;
3. Communicate actively with staff and stakeholders about the new rules and the firm’s internal processes and procedures. This should include: facilitating appropriate training for UK-based employees and their managers (whether based locally or overseas); telling their UK-based employees about the FCA’s and the PRA’s whistleblowing services; and requiring their appointed representatives and tied agents to tell their UK-based employees about the regulators’ whistleblowing service;
4. Inform the regulators if they lose a whistleblowing claim in the employment tribunal; and
5. Advise employees that they may not contract out of their right to blow the whistle. Specifically firms must be explicit in any employee’s settlement agreement, that they retain a legal right to blow the whistle.
The Whistleblowers’ Champion has the key role in implementing all of this. The FCA is explicit that it expects a firm to appoint a non-executive director to the role, who will then be responsible for ensuring and overseeing the integrity, independence and effectiveness of all of the above. This is a big mandate with substantial personal responsibilities, which individuals would be well advised to consider carefully before taking on.
Finally, whilst the rules currently apply only to a limited group of larger firms, they have the status of non-binding guidance for all other FCA regulated entities. So, the FCA may consider that any regulated firm that does not have regard to the regime, may have failed to meet other binding FCA principles (such as the requirement to “take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.”
Any FCA regulated firm would ignore the rules at its peril."
(Note: The words are Andrew's, the emphasis is mine )