By Michael Gorm Madsen and Catrine Søndergaard Byrne

As of 1 January, new Danish legislation concerning whistleblowing will take effect. According to the new legislation, all Danish companies in the financial sector must have a whistleblower scheme that enables employees and board members anonymously to report any breach of the financial regulation.

Financial Companies Subject to the Regulation

All companies subject to the Danish Financial Supervisory Authority’s supervision must in general observe the new rules requiring the implementation of whistleblower schemes. Due to this, small businesses as well as large companies, such as insurance companies, pension funds and banks, must implement such a scheme.

Only Danish companies, including branches of Danish companies abroad, will be subject to the new regulation. Accordingly, with respect to groups, including Danish and foreign supervised companies, the regulation will only apply to Danish companies.

Choice of Whistleblower Scheme

Before initiating the required filing process with the Danish Data Protection Agency (DPA), the company should consider whether the whistleblower scheme, which covers the mandatory financial regulation, should also include any breach of other non-financial legislation; e.g., the Danish Working Environment Act and the Danish Criminal Act. The purpose of implementing a scheme that covers financial regulation as well as other legislation relevant to the company is that users of whistleblower schemes are rarely able to assess whether a criminal offence is subject to financial regulation.

Both schemes must meet the regulatory requirements for establishing an internal whistleblower system.

Compensation to the Reporting Employee

According to the new legislation, employees using the scheme to report any breach of the financial regulation are protected against employment-related consequences such as termination, lack of promotion and demotion. However, if an employee’s rights are violated, the employee may be entitled to compensation. Such compensation must be based on the principles that apply to any breach of the Danish anti-discrimination legislation, entitling the employee to six to 12 months’ additional salary.

Approval from the Danish Data Protection Agency

A whistleblower scheme must be filed with and approved by the DPA. In order to file a notification for a whistleblower scheme, the company must have obtained approval to process the information reported. This may be done by filing a personal administration notification.

Accordingly, two notifications may be relevant, or possibly a modification of an existing personal administration notification in order for this notification also to include the whistleblower scheme. Such notification must be filed with the DPA as soon as possible as the DPA’s long processing times may otherwise delay the final application.

As the new legislation will take effect soon, the DPA has set up a special urgent application procedure for approval of the financial companies’ whistleblower schemes. In this respect, the DPA has prepared two standard notifications concerning the financial regulation and the financial regulation, including other regulation, respectively.

The deadline for filing the whistleblower notification is set to 15 January. If notification has not been filed on this date, the DPA may not be able to grant permission effective as from the date when the legislation comes into force.

Companies that already have an approved whistleblower scheme must amend the scheme to comply with the new legislation. Such amendments must be notified to and approved by the DPA.

As soon as the approval has been obtained, the whistleblower scheme may be implemented. Before implementing the scheme, the companies should inform their work councils (or employee representatives) about the schemes and prepare information and written guidelines/policies for using the scheme.

Noncompliance may be sanctioned by a fine.

Michael Gorm Madsen is a partner at Ronne & Lundgren. He can be reached at mgm@rl.dk.

Catrine Søndergaard Byrne is an associated partner at Ronne & Lundgren. She can be reached at csb@rl.dk.