Ruth Christy and Paul Fontes highlight the issues concerning whistleblowing and look at developments in the financial services sector.
On 18 December 2024, Gareth Snell MP became the latest campaigner to put before Parliament a new whistleblowing bill, with a view to enhancing whistleblowing laws first introduced in 1998. Calls for changes in the law have gained traction since movements such as #MeToo, with two private members’ bills put before Parliament as recently as 2022 and January 2024.
This latest bill will be considered by Parliament in April 2025. Private members’ bills don’t often make it onto the Statute Book, but even if this bill fails, it is indicative of the increased focus of legislators and regulators on whistleblowing.
Recent and proposed changes in the law, a continuing stream of press reports of wrongdoing, and in some cases the treatment of those reporting it, have highlighted a pressing need to improve whistleblowing frameworks. This has even led to some to argue for financial incentives to encourage whistleblowers to come forward.
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Lessons to learn from financial services
In the financial services sector, whistleblowing has been high on the agenda ever since the 2008 financial crisis and a number of subsequent scandals, inquiries and regulatory findings.
Protection for whistleblowers is enshrined in the Employment Rights Act 1996, with the emphasis being on “workers” disclosing wrongdoing to employers, other “responsible persons” and “prescribed persons”. The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) are both “prescribed persons”.
Whistleblowers who make qualifying disclosures to the FCA or PRA are protected from dismissal or other detrimental treatment provided that they reasonably believe that the wrongdoing falls within the regulators’ remit and that their disclosure is substantially true.
Furthermore, the FCA’s rules make it clear that they regard any detrimental treatment of a whistleblower by any regulated firm as a serious matter which may call into question the fitness and propriety of the firm or relevant members of staff.
Additionally, certain firms (including banks, building societies and the larger insurers) must have in place appropriate and effective arrangements for the disclosure of reportable concerns by whistleblowers (including making it clear to all staff that they can report such concerns directly to the FCA or PRA) and must roll out training to all UK staff.
Sexism in the City inquiry
Whistleblowing in financial services came under particular scrutiny in 2023 as a result of the Treasury Committee’s Sexism in the City inquiry which looked at barriers faced by women in the sector, including gender pay gaps, sexual harassment and misogyny.
It concluded that little progress had been made since a similar inquiry in 2018 and was “appalled” by testimonies of sexual harassment within the sector. It heard that whistleblowing processes in firms were often ineffective at tackling bad behaviour or protecting those who reported sexual harassment and recommended that the government strengthen whistleblowing laws.
The then government was carrying out a general review of whistleblowing laws, but its findings were never published.
The Inquiry also recommended that the FCA launch an awareness campaign of its whistleblowing line, and clarify that nothing in a non-disclosure agreement (NDA) prevents an individual from reporting harassment. The Inquiry recommended capturing data on the extent of the use of NDAs in cases of non-financial misconduct (e.g. bullying, harassment and discrimination) to consider evidence for further action.
Non-financial misconduct
In October 2024 the FCA published the findings of its survey of more than 1,000 banks, brokers and wholesale insurers into how such firms recorded and managed allegations of non-financial misconduct.
The findings included the fact that, while in banks whistleblowing was a common way of identifying incidents of misconduct, whistleblowing policies were not in place at all of the firms surveyed. The FCA has stated it is expecting firms to use the survey data to reflect on whether their own processes, procedures and controls are sufficiently robust to allow them to detect and address misconduct.
The survey will be followed by new FCA regulatory rules on non-financial misconduct expected in early 2025 so now is an opportune moment for financial services firms to assess their whistleblowing arrangements and ensure that they provide an effective means of identifying misconduct.
Implications for all employers
Indeed, with the introduction of the new duty on all employers to take reasonable steps to prevent sexual harassment, and the need under the Economic Corporate Crime and Transparency Act 2023 to have in place reasonable procedures to prevent fraud, now is a good time for all organisations to review the effectiveness of their whistleblowing procedures.
For all employers, lessons can be learned about workers’ reluctance to blow the whistle on wrongdoing. Whether the latest bill becomes law or not, all employers need to ensure their whistleblowing policies are well publicised, truly supported from the top, and that whistleblowers will not face retaliation.
Unless employers can demonstrate that they are getting this right, then at some point it is likely that further legislation and regulation will be forthcoming and we might even see the introduction of financial awards for whistleblowers.
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