UK whistleblowing and COVID-19

It is easy to forget that the start of the COVID-19 crisis featured Dr Li Wenliang’s whistleblow in Wuhan, China. And he is not the only COVID-19 whistleblower - earlier this month Thomas Modly, former US Navy Secretary, resigned after a backlash against his firing of a US Navy Captain over his warning of an outbreak aboard the USS Theodore Roosevelt. Beyond these examples, there is further evidence that the response to the COVID-19 crisis has been driven in part by whistleblowers, who have repeatedly flagged new outbreaks, gaps in state health systems and a host of other issues.

This is entirely to be expected - people are more likely to disclose issues which affect matters of public health, life and death, with less regard for the potential negative consequences for themselves. And the trend is also likely to manifest itself in the financial sector. Since the crisis of 2007-2008, in many jurisdictions encouragement of raising of concerns relating to a firm’s culture and conduct has formed a key part of regulators’ drive to improve culture, and whistleblows increasingly provide a starting point for internal and regulatory investigations.

In the UK, many financial institutions and asset managers must comply not only with the provisions of the Public Interest Disclosure Act 1998 (“PIDA”), but also with SYSC 18 in the FCA Handbook which was introduced in 2016 (enshrining the principles of non-retaliation and confidentiality for whistleblowers). The COVID-19 pandemic and its consequences are likely to create further risks that concerns will be raised, relating to different aspects of firms’ response, including:

• Public health aspects of a firm’s response to COVID-19, for example:
  • interpretation and application of the UK Government’s and FCA’s guidance relating to identifying employees who are required to attend the workplace;
  • any failures, in the workplace, to comply with Government or FCA guidance on social distancing;
  • potential failures with regard to enhanced obligations owed to certain high risk categories of employees (eg pregnant or vulnerable employees or those with underlying health conditions).
• Customer-facing aspects of a firm’s response, for example:
  • application of the FCA’s temporary guidance, issued on 9 April 2020, relating to forbearance towards consumers struggling to make repayments under personal loans, credit cards or other credit arrangements due to COVID-19;
  • a firm’s implementation of the UK Government’s CCFF and CBILS schemes; and
  • Other instances where, in the eyes of a person raising concerns, a firm’s conduct could be called into question for not having done the “COVID right thing” (even if acting in accordance with contractual requirements).

PIDA affords protection where a worker makes a disclosure regarding a criminal offence, a failure to comply with a legal obligation, or “the putting of the health and safety of an individual in danger”. This is likely to encompass the public health aspects referred to above. There may be scope for debate as to whether concerns raised about customer-facing aspects of the firm’s response fall within the scope of PIDA, as they do not obviously involve a breach of any legal obligation. However SYSC 18 is broader. It applies to “whistleblowers”, not just “workers”, and is engaged where there is a “reportable concern”, which includes but is wider than a “protected disclosure”. It also covers:

• breaches of FCA Rules (as opposed to Guidance);
• a breach of a firm’s policies and procedures; and/or
• behaviour that harms or is likely to harm the reputation or financial well-being of the firm.

In all likelihood, concerns raised relating to the customer-facing aspects referred to above will be matters which firms with a strong culture will want to investigate – however, it is likely that these matters will amount to behaviour which could harm the reputation of the firm for the purposes of SYSC 18.

It follows that firms need to be alert to the need to treat whistleblows concerning the issues set out above as protected under SYSC 18. Where this is the case, firms should then follow their usual processes and procedures (assuming those are already compliant with SYSC 18) for handling whistleblows.

The current crisis also prompts further focus on the scope of “public interest” for the purposes of whistleblower protection. One of the limbs which must be satisfied in order for workers to gain protection against dismissal or detriment in connection with a whistleblow is that the whistleblower must have a reasonable belief that the disclosure (of a failure to comply with a legal obligation etc) is in the public interest. It is easy to see how this might be more easily engaged in the scope of COVID-19 related disclosures.

Finally, it is worth remembering that issues in the healthcare sector have often driven the development of whistleblower protection, and calls for further reform, in the UK. The All Party Parliamentary Group on Whistleblowing remains active, most recently playing a hand in a bill laid before Parliament in January 2020 to create a new “Office of the Whistleblower” to provide further protections for whistleblowers. The APPG reform agenda has tended to focus on the healthcare and financial sectors, so to the extent that its activities gain momentum from the public health aspects of the COVID-19 crisis, this is very likely to impact the financial sector in the near future.

See our coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.

Please also see our article: Ten points for Non-Executive Directors on whistleblowing.