UK FCA Promotes Whistleblowing

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The Financial Conduct Authority is adding additional rules to promote whistleblowing among financial firms following banking scandals such as the Libor rate manipulation.

The rules will go into force next year (September 2016) and require the covered firms to, among other things, appoint a whistleblower’s champion in senior management, educate employees and contractors about government whistleblowing services, and make an annual report to the board on whistleblowing.

The law also includes a provision requiring text in employment and settlement agreements explaining that workers have a right to blow the whistleblower. Settlement agreements in the UK are similar to separation agreements here in the US.

The law did not adopt whistleblower incentives, which were earlier considered by the agency but rejected. Rewards and retaliation protections are the primary mechanisms in the U.S. to promote whistleblowing.

In some ways, the laws mimic certain provisions previously adopted by the United States to increase and protect the individuals reporting corporate wrongdoing:

Whistleblower Education in the U.S.

The U.S. has previously adopted a similar education review in the context of Medicaid fraud. The Deficit Reduction Act of 2005 required health care organizations receiving or making annual Medicaid payments of at least $5 million educate their managers, employees, contractors and agents of the rights of whistleblowers, the federal False Claims Act and the relevant state laws and protections. The requirement went into effect in 2007.

If an organization knows or should know that it is not meeting these educational requirements of the U.S. Government, then the Government may bring a claim under the False Claims Act for the recovery of all claims under Medicaid during the noncompliance.

Confidentiality Agreements in the U.S.

The SEC and Congress in the FY2015 Budget have put in place restrictions that prohibit companies from barring employees from reporting violations of the federal securities laws (SEC) or fraud, waste and abuse in government contracts (False Claims Act).

Separation Agreements

One area where the UK FCA might be going farther than the United States law is in the required language in separation agreements providing for whistleblowers. Here in the United States, companies are doing everything that they can to limit the ability of individuals to take advantage of the whistleblower programs in separation agreements.

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