Whistle Blowers’ Protection Act & Policies
Background
- Corporate Governance (CG) vital for financial crime prevention
- Whistle Blower (WB) Mechanism an important tool
- WB mechanism globally: governments, organisations, institutions, financial entities
- Whistle Blower Policy/ Scheme (WBP) – framework for respective entities
- WB Protection (WBP) Law: In several countries to address major impediment
- In India: WBP Law (yet to be enforced), Companies related laws/ regulations, financial sector regulations cover various aspects
Objective and Purpose
- Disclosure about illegal or unethical conduct (including corruption) in an organization
(i) By an employee or any other stakeholder (including public)
(ii) In confidence to designated official - Valuable source of such acts that escape internal controls, third party audits and regulatory inspections
Modality: Key Aspects
- Scope: Specifying nature of acts and the officials/ executives that may be reported
- Open to: Stating who may report (WB) viz. stakeholders – internal, external, and public
- Manner of reporting: With details of WB, or anonymous/ pseudonymous
- Modality: Paper, Email, Portal, App based
- Confidentiality: WB identity confidential – even Board and Management.
- Protection: No vindictive action against WB
- Vexatious Complaints: WB to be punished
- Dissemination: Internally and to public through website, promotion, etc.
Whistle Blowers’ Protection Act, 2014 (WBP)
(WBP, 2011 amended to WBP, 2014 but lapsed as not passed in Rajya Sabha before dissolution of Lok Sabha, awaiting notification for enforcement.)
- Objects and Reasons:
(i) Adequate protection to complainants of: (1) Corruption, (2) Wilful misuse of power/discretion causing loss to the Govt. (3) Criminal offence by a public servant
(ii) Not applicable to armed forces
(iii) Regular mechanism for such disclosures
(iv) Procedure to deal with complaints received
(v) Punishment for revealing identity of complainant and safeguards against victimisation
(vi) Punishment for false or frivolous complaints - Key Aspects:
(i) A disclosure – considered a Public Interest Disclosure
(ii) To contain identity of the WB.
(iii) Inquiry by the Competent Authority (as specified)
(iv) Matters not to be inquired into:
(v) Decided by a Court/ Tribunal
(vi) Public inquiry ordered
(vii) Referred for inquiry
(viii) Made after lapse of 7 years
(ix) WB right to complain against victimisation
(x) Persons making false/ frivolous complaints – Imprisonment up to 2 years and fine upto ₹30,000/-
Whistle Blower Policy Requirements for Financial Institutions
- Legal/ Regulatory Obligations
(i) Companies Act, 2013 – prescriptions:
S. 177 (9) – Vigil mechanism for listed and other specified classes of companies
S. 177 (10) – Protection of WB under vigil mechanism
(ii) Companies (Meetings of Board and its Powers) Rules, 2014 prescribes:
R. 7 – (1) Classes of companies that should have vigil Mechanism, (2) ACB (or Director nominated as such) to oversee, (3) Adequate safeguards against victimisation of WB (employees and Directors)(iii) SEBI Regulations for Listed Companies/ Asset Management Companies
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
SEBI (Prohibition of Insider Trading) Regulations, 2015
Require listed companies to have WBP.
AMCs to have WBP for prevention of insider trading.
(iv) Revised Guidelines for handling of complaints in Ministries/ Departments/ Organisations of Govt. of India dated 9/10/2024 (Ministry of Personnel)
PSBs covered under these Guidelines administered by CVC
(v) RBI Protected Disclosures Scheme for Private Sector and Foreign Banks
WB complaints to RBI.
Individual banks to have WB mechanism.
(vi) Master Circular on Corporate Governance for Insurers, 2024
Requires Insurers to have WB Policy
Links to Various Regulatory Documents/ Literature
- Whistle Blowers Protection Act 2014 (https://thc.nic.in/Central%20Governmental%20Acts/Whistle%20Blowers%20Protection%20Act,%202014..pdf)
- The Companies Act, 2013 (http://www.fintrac-canafe.gc.ca/guidance-directives/compliance-conformite/rba/rba-eng.asp)
- Companies (Meetings of Board and its Powers) Rules, 2014 (https://ca2013.com/wp-content/uploads/2016/08/The-Companies-Meetings-of-Board-and-its-powers-rules-2014-dated-31032014.pdf)
- Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 [Last amended on July 10, 2024] (https://www.sebi.gov.in/legal/regulations/jul-2024/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-regulations-2015-last-amended-on-july-10-2024-_84817.html)
- Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (as amended on June 26, 2024) (https://www.sebi.gov.in/legal/regulations/jun-2024/securities-and-exchange-board-of-india-prohibition-of-insider-trading-regulations-2015-as-amended-on-june-26-2024-_84494.html)
- Ministry of Personnel, Public Grievances and Pensions, Dept. of Personnel & Training, Office Memorandum – Revised Guidelines for handling of complaints in Ministries/ Departments/
Organisations of Govt. of India dated 9/10/2024 (https://dopt.gov.in/sites/default/files/Complaint%20handling%20guidelines%20%281%29.pdf) - (i) RBI Circular Introduction of ‘Protected Disclosures Scheme for Private Sector and Foreign banks' dated 18/4/2007 (https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=3427)
(ii) Annex to RBI Circular – Protected Disclosures Scheme for Private Sector and Foreign Banks (https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=589)
(h) Master Circular on Corporate Governance for Insurers, 2024 dated 22/5/2024 (https://irdai.gov.in/document-detail?documentId=4916164)
(i) United Nations Office on Drugs & Crime, Tertiary – Anti-Corruption Module 6: Detecting and Investigating Corruption – Key Issues Whistle-blowing Systems and Protections
(https://www.unodc.org/e4j/en/anti-corruption/module-6/key-issues/whistle-blowing-systems-and-protections.html)