Whistleblowing in the financial services sector – back in focus

28 April 2021

The Financial Conduct Authority (FCA) recently launched a whistleblowing campaign, “In confidence, with confidence”, encouraging individuals working within the financial services sector to come forward and raise any concerns they have regarding potential wrongdoing, emphasising its commitment to protecting their identity and an increase in both resources and training at the FCA. 

The FCA also commits to create a report about all concerns which have been expressed and to provide updates to a whistleblower every 3 months if so requested. 

The launch of the campaign followed earlier reports from the FCA that complaints from whistleblowers have increased five-fold from 2017.  This was supported by a spokesperson from the whistleblowing charity, Protect, who confirmed that finance was one of the industries it received the most complaints about. 

The Government has also committed to reviewing existing whistleblowing laws to ensure that they are “fit for purpose” given the record number of cases brought before the Employment Tribunal by workers claiming that they have been dismissed for whistleblowing. 

We have seen an increase in matters involving whistleblowing allegations and that this is not surprising given the impact of the global pandemic on matters such as health and safety, contracts of employment and pay and, of course, furlough fraud.  

In short, whistleblowing is clearly back in focus, both in the financial services sector and generally.  Last year, we commented that recent cases seemed to indicate that Courts and Tribunals are recognising the difficulties faced by whistleblowers in coming forward.  However, whistleblowing laws are complicated and it can be difficult for people with concerns about potential wrongdoing by their employer to come forward, ensure they are protected and, if necessary, successfully bring a claim if they have suffered detriment or dismissal as a result of doing so.

So, what are the key points would-be whistleblowers (and their employers) should be aware of?

Who is protected?

The protection provided by whistleblowing legislation is not afforded to employees alone.  Agency workers, LLP members, judicial office-holders and workers who are not employees are also protected.

There is no minimum service requirement in order to bring a whistleblowing claim (protection is a “day one right”) and, significantly, there is no cap on the amount of compensation that may be awarded in whistleblowing claims (unlike in standard unfair dismissal claims). 

 

Protected from what?

If an employee is dismissed because they have made a “protected disclosure” (i.e. blown the whistle), that dismissal is automatically unfair.

Those who are not employees are protected from being subjected to detrimental treatment as a result of making a protected disclosure (for example, by being subjected to unfair treatment, harassment or victimisation).  Similarly, employees are also protected from being subjected to detriment short of dismissal.

 

What disclosures are protected?

In order for someone (the whistleblower) to be protected, they must make a disclosure of information which, in their reasonable belief, is made in the public interest and tends to show that wrongdoing relating to one or more of the following has, is, or is likely to occur:

  • criminal offence
  • failure to comply with a legal obligation
  • miscarriage of justice
  • health and safety
  • damage to the environment; or
  • deliberate concealment of information relating to any of the above.

The most common type of wrongdoing we come across in practice is in relation to a failure to comply with a legal obligation, which is widely interpreted and includes breaches of regulatory requirements.  For example, an employee raising concerns that their employing bank / hedge fund is not complying with the rules of the FCA would fall within this category.  Allegations regarding furlough fraud would also fall within this. 

Further, there has been an increase in disclosures regarding health and safety matters in light of issues faced as a result of the pandemic (with regard to the supply of appropriate PPE, or appropriate measures being put in place before individuals are required to return to the workplace, for example).  

Other requirements regarding disclosures include the following:

  • There must be a “disclosure of information”, which means conveying facts (as opposed to mere allegations) even if those facts are already known by the person the disclosure is being made to. 
  • The disclosure may be verbal or in writing, though individuals are advised to record their concerns in writing (perhaps in an email, or in notes of meetings/conversations) to ensure that there is a clear record of a disclosure having been made and exactly what information was disclosed.
  • The information being disclosed does not necessarily have to be correct, but the person making the disclosure must have a “reasonable belief” that it is.
  • The person making the disclosure must have a reasonable belief that it is in the public interest to make the disclosure.  This is a fairly low threshold to meet and is judged in light of factors such as: the number of people in the group whose interests the disclosure served; the nature of the alleged wrongdoing and of the interests affected; and the identity of the wrongdoer.
  • The disclosure must be made to one of the categories of people listed in the legislation (see below).

 

Who should the disclosure be made to?

The disclosure should normally be made to the individual’s employer.  If the employer has a whistleblowing policy in place, this should be followed. 

If the employer’s whistleblowing policy authorises the disclosure of concerns to a third party (a whistleblowing hotline or a regulator, for example), disclosure can be made to that entity in accordance with the policy and the individual will be treated as having made the disclosure to their employer (and therefore qualify for protection).

It is also possible to make a disclosure to a “prescribed person” as specified by statute, such as HM Revenue & Customs, the Health & Safety Executive, the Serious Fraud Office and the FCA.

Contacting the FCA whistleblowing team would be a disclosure to a “prescribed person”.  However, it is important to note that, in order to be protected, persons making a disclosure to such an entity must reasonably believe that the matter being reported is within the remit of that entity and that the information disclosed is “substantially true”.  This is an additional hurdle that does not apply when making the disclosure to the employer.  Contacting the FCA should not, therefore, be a knee jerk reaction without consideration of these principles.

There are circumstances in which disclosures made to others can also be “protected disclosures”, but those are not considered in this article.  For instance, it would require very extreme and urgent circumstances for disclosure to any media to amount to a protected disclosure.

 

A stumbling block
One of the most difficult aspects of bringing a whistleblowing claim is establishing causation.  That is, demonstrating that one has been subjected to a detriment (such as being ostracised, bullied, denied promotion or a pay rise, etc) on the ground that they have made a protected disclosure.  This requires a close analysis of the facts of each individual case to establish whether it can be shown that the making of the protected disclosure materially influenced the detrimental treatment.  It is a difficult hurdle to overcome and, often, the stumbling block faced by individuals seeking to bring a claim.

This causation test is even more difficult in cases involving dismissal in that, for the dismissal to be automatically unfair on grounds of whistleblowing, it must be shown that the reason or principal reason for the dismissal was the making of the protected disclosure.  Again, this requires a detailed analysis of the facts and evidence.

In practice, employers do not overtly apply detriments or dismiss employees because of them raising concerns about questionable conduct in the workplace.  More commonly, such raising of concerns may lead to an employee losing support of management and perhaps receiving a poor appraisal or bonus or being subjected to a performance improvement plan on allegedly unrelated grounds and/or being more likely to be made redundant.

The FCA has been very clear in confirming its commitment to preserving the confidentiality of whistleblowers’ identities.  It will be interesting to see how this works in practice. Notwithstanding the FCA’s commitment, there will still no doubt be a concern amongst potential whistleblowers that employers will be able to work out who has passed information to the FCA, particularly in smaller organisations where relevant information might only be known by a few individuals.   

Conclusion
It remains the case that Regulators such as the FCA are reliant on whistleblowers to expose wrongdoing within organisations and it is those exposures, and the risk of exposure, which will hopefully drive change where change is needed.  The recent figures released by the FCA and Government indicate that people are willing to speak up where they feel necessary and, it seems, there are situations (no doubt exacerbated by the pandemic) that require attention.  It is important for the whistleblowing laws to allow this to happen whilst protecting well-intentioned whistleblowers from detriment, dismissal and damage to their careers.

It can be tricky to navigate the whistleblowing legislation and it would be prudent for individuals considering raising concerns, whether internally or to their Regulator, to seek legal advice before doing so to ensure they are fully protected.

Kingsley Napley has extensive experience in advising employers and senior executives on whistleblowing matters, particularly in the financial and professional services sectors.  Please contact a member of our Employment Department if you have any specific queries on the matters referred to in this article.

FURTHER INFORMATION

Should you have any queries regarding the issues raised in this blog please contact  a member of  our team.

 

ABOUT THE AUTHORS 

Nick is a highly experienced employment lawyer with an exceptionally strong reputation in the City of London and beyond. Nick acts for executives, partners and employers across a variety of sectors including: professional services, “C-suite”, hedge funds, legal, retail, trading, insurance, technology, private equity, IT, accountancy, regulatory and banking.

Bina is an employment law specialist with considerable experience in dealing with all aspects of the employment relationship. She particularly enjoys dealing with equality and discrimination matters. She acts for both employers and senior executives across various sectors.

 

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