Developments in Whistleblowing (2015)

Corporate wrongdoing continues to occupy a prominent place in business headlines, and with it the issue of how to manage whistleblowing. Every corporate scandal, from bribery to price-fixing, inevitably involves at least a few insiders who were aware, or had suspicions, that something was amiss. Prosecutors and regulators across the world receive information from employees within companies who detect wrongdoing, but not every case features a whistleblower. Given that many more incidents may go undetected by the authorities, it is obvious that they have every reason to encourage whistleblowers to come forward.In the United Kingdom in recent months there has been increasing discussion of the role of whistleblowing, the legal framework necessary to support it and the best means by which to promote it.Weaknesses identified in whistleblower protection in the UKThere have been growing concerns that whistleblowers are not afforded adequate protection under whistleblowing law in the UK. These concerns have become heightened in the wake of the LIBOR rigging and mis-selling scandals. The Parliamentary Commission on Banking Standards (PCBS) was established in July 2012, following the LIBOR scandal, to conduct an inquiry into professional standards and culture in the UK banking sector and to make recommendations for legislative and other action.On 19 June 2013 it published its long-awaited report, Changing banking for good. The PCBS reported that it was 'shocked' that 'so many people turned a blind eye to misbehaviour and failed to report it', and stated: 'The people best placed to flag up emerging failings in culture and standards are a bank's own employees. Despite the widespread knowledge of LIBOR-rigging on the trading floor, no employee apparently felt sufficiently concerned, or sufficiently confident, to 'whistleblow' by escalating the problem internally, or informing the regulator.'The PCBS stressed that more needs to be done to encourage whistleblowers to come forward. The report made a number of recommendations to ensure more effective support for whistleblowers in the banking sector. In particular, it proposed that:* A non-executive board member - preferably the chairman - should be given specific responsibility and held personally accountable for the effective operation of each firm's whistleblowing regime.* The board member should be held personally accountable for protecting whistleblowers against detrimental treatment. If a whistleblower alleges detrimental treatment, it should be for the designated board member to prove that the firm acted appropriately.* In addition to formal whistleblowing policies, firms should have informal procedures that encourage individuals to discuss concerns (even where there is no specific allegation of wrongdoing).*The appropriate regulator (Financial Conduct Authority (FCA)/ Prudential Regulation Authority (PRA) ) should regularly examine a firm's whistleblowing records.* Firms should be required to inform the FCA of any successful whistleblowing claims brought by employees before employment tribunals. The FCA should consider taking enforcement action against firms found to have acted in a manner inconsistent with their regulatory requirements set out in the FCA handbook.The PCBS also called on the FCA to undertake research into the impact of financial incentives in the United States (US) in encouraging whistleblowing, exposing wrongdoing and promoting integrity and transparency in financial markets. This is considered further below.UK Government call for evidence on whistleblowing frameworkAlthough the scandals within the financial services sector have brought to the fore questions around the effectiveness of the UK whistleblowing framework, the concern that whistleblowers may not be sufficiently protected and encouraged to report wrongdoing is not limited to this one industry.Separately to the PCBS report, on 12 July 2013, the Department for Business, Innovation and Skills (BIS) issued a call for evidence on how the current whistleblowing framework is working. …