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WBK Industry News - State Regulatory Developments

NYDFS Issues Whistleblowing Guidance

The New York Department of Financial Services (DFS) recently issued guidance on whistleblowing programs, enunciating principals that all institutions chartered, licensed, or regulated by DFS, regardless of industry, size, or number of employees, should account for when designing and implementing such programs.

The guidance defines “whistleblowing” as the reporting of information or concerns, by one or more individuals or entities, that are reasonably believed to constitute illegality, fraud, unfair or unethical conduct, mismanagement, abuse of power, unsafe or dangerous activity, or other wrongful conduct, including, but not limited to, any conduct that may affect the safety, soundness, or reputation of the institution.  A whistleblower may be any person who has an opportunity to observe improper conduct at a company, including current or former employees, agents, consultants, vendors or service providers, outside counsel, customers, or shareholders.

The guidance recognizes that due to the variety of institutions subject to oversight by DFS, there is no “one size fits all” whistleblowing program model, and that a program should be based on factors such as the institution’s size, geographical reach, and lines of business.  However, the guidance states that DFS will consider the following factors, at a minimum, in determining a whistleblowing program’s effectiveness:

  • Independent, well-publicized, easy to access, and consistent reporting channels;
  • Strong protections for whistleblower anonymity;
  • Procedures for identifying and managing conflicts of interest;
  • Adequately trained staff;
  • Procedures for investigating allegations of wrongdoing;
  • Procedures for ensuring appropriate follow-up to valid complaints;
  • Protection from retaliation;
  • Confidential treatment;
  • Appropriate oversight by senior management, internal and external auditors, and the Board of Directors; and
  • A top-down culture of support for the whistleblowing function.