Legal Aspects

The Protected Disclosures Act

The SA government has indicated its support for the concept of whistle blowing and acknowledged the need to offer legal protection to whistle blowers with the introduction of The Protected Disclosures Act, Act 26 of 2000 (“the Act”), aptly dubbed the Whistle Blowers Act. The Act makes provision for employees to report unlawful or irregular conduct by employers and fellow employees, while providing for the protection of employees who blow the whistle. The Act makes provision for the following:

Employees to report unlawful or irregular conduct by employers and fellow employees;

• Protection of employees who blow the whistle from “occupational detriment” by employers when making certain “protected disclosures”.

The irregularities covered by the Protected Disclosures Act relate to the following:

• Criminal offences;
• Failure to comply with certain legal obligations;
• Miscarriages of justice;
• Endangering of the health or safety of individuals;
• Damage to the environment; and
• Unfair discrimination.

In terms of the Act, the “occupational detriment” from which the whistle blower is protected is:

• Being subjected to any disciplinary action;
• Being dismissed, suspended, demoted, harassed or intimidated;
• Being transferred against his or her will;
• Being refused transfer or promotion;
• Being subjected to a term or condition of employment or retirement which is altered, or kept altered, to his or her disadvantage;
• Being refused a reference, or being provided with an adverse reference, from his or her employer;
• Being denied appointment to any employment, profession or office;
• Being threatened with any of the actions mentioned above; or
• Being otherwise adversely affected in respect of his or her employment, profession or office, including employment opportunities and work security.

The Act further indicates that the disclosure is protected if made to certain persons, namely:

• Legal Advisor;
• Employer;
• Member of Cabinet/ Executive Council of Province, where relevant; where the employer is a Public Sector body;
• To the public Protector;
• Auditor-General; and
• Any Person, prescribed in certain circumstances.

The Act further indicates that the disclosure is protected if made to certain persons, namely:

• To protect employees who blow the whistle;
• To provide for remedies for whistle blowers against certain occupational detriment;
• To provide procedures for whistle blowers to disclose information of improprieties in a responsible manner;
• To create a culture facilitating the disclosure of information by employees relating to criminal and other irregular conduct in the workplace in a responsible manner; and
• To promote the eradication of criminal and other irregular conduct in the public and private sectors.

Sarbanes Oxley Act

Following the Enron financial disaster in the US where Arthur Anderson and Partner’s provided both internal as well as external auditor services, the American legislature was pressurised to address the situation. The question arose as to how Legislation could be tightened to prevent a repetition of the Enron catastrophe. All eyes were on the audit profession in the USA.

On April 24 2002 the House of Representatives in the U.S.A adopted Legislation (called the Sarbanes-Oxley Act) to promote auditor independence by prohibiting fundamental conflicts of interests.

The Act establishes a new regulatory body to oversee the accounting industry and discipline auditors, replacing the previous system in which the industry largely policed itself.

The Act also prohibits accounting firms from providing certain consulting services to companies whose books they audit. Section 201 lists nine non-audit services which may not be provided at the same time as the audit. Other non-audit services may, however, be provided if they are pre-approved by the audit committee.

Public Sector

Public Finance Management Act (South Africa)

Treasury regulations issued in terms of the Public Finance Management Act, 199 (“PFMA”) placed an onus on public sector organizations to develop fraud prevention plans by 31 March 2001. An effective strategy to manage whistle blowing will contribute immensely toward meeting this requirement.

The Companies Act (2008)

Section 159 (Protection for whistle blowers; item 7) states – “A public company and state owned company must directly or indirectly:

a)Establish and maintain a system to receive disclosures (contemplated in this section) confidentially, and act on them; and

b)Routinely publisise the availability of that system to the categories of persons contemplated (in subsection 4).