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On October 6, the UK Financial Conduct Authority (FCA) issued new rules to protect certain whistleblowers in the UK’s financial and insurance sectors. This is the latest rule-making example from a growing group of enforcement authorities that mandate access and protection for individuals who wish to report corporate misconduct.
The UK’s new rules specifically apply to large banking entities (with assets of at least GBP 250 million) and certain investment and insurance firms, although the FCA noted that the new rules are “non-binding guidance” for the other firms it regulates. By March 7, 2016, covered firms must appoint a “whistleblowers’ champion” from senior management to oversee the firm’s preparation for the new whistleblower regime, which will come into force on September 7, 2016. Under the new regime, covered firms will need to do the following:
- Set up internal whistleblowing arrangements within all covered companies to handle “all types of disclosure from all types of person”;
- Communicate with affected employees about the whistleblowing services offered by FCA and Prudential Regulation Authority (PRA);
- Require their appointed representatives and tied agents to communicate with their UK-based employees about the whistleblowing services offered by FCA;
- Include text in settlement agreements to explain that workers have a legal right to whistleblow;
- Alert the FCA if they lose any employment tribunal case with a whistleblower; and
- Report at least annually about whistleblowing to their boards.
The FCA and PRA are also implementing new rules aimed at improving individual accountability in the UK banking sector. These new rules focus on ensuring clear lines of accountability for senior managers and “material risk takers” in a firm.
The idea of protecting whistleblowers is certainly not new. Laws such as the US False Claims Act, the Sarbanes-Oxley Act, and the Dodd-Frank Act, as well as laws of other countries, provide whistleblower protection, and criteria under the US Federal Sentencing Guidelines encourage firms to have reporting channels in place. This latest instalment in the whistleblowing area in the form of the new UK rules merely reemphasizes the importance of compliance programs that establish and corporate cultures that respect safe channels through which employees can report out potential wrongdoing within their firms.