Bullying, sexual harassment and discrimination are the most commonly recorded personal misconduct concerns in the UK’s financial sector, the Financial Conduct Authority (FCA) has found.
The FCA’s survey, Culture and Non-Financial Misconduct, was designed to help it better understand how investment banks, brokers and wholesale insurers record and manage allegations of non-financial misconduct, such as bullying, sexual harassment and discrimination.
The survey of over 1,000 firms found that the number of allegations reported increased between 2021 and 2023 but, its authors say, a high number of complaints could be an indicator of a healthy culture in which people feel they can speak up, confident they will be listened to. A low reporting rate may indicate the opposite.
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In the three years covered by the survey, bullying and sexual harassment (26%) and discrimination (23%) were the most recorded concerns.
However, the large “other” group of concerns (41%) indicated to the authors how difficult it was to categorise issues of personal misconduct.
The FCA found a variety of mechanisms through which firms identified concerns. Some firms were using their internal systems to identify potential issues, although formal processes and whistleblowing were the most prevalent methods of detection.
The findings were being shared to enable firms to benchmark their own reporting against this peer analysis and consider if their processes for reporting and investigating possible non-financial misconduct remain appropriate, said the FCA. Trade associations would play a key role in coordinating industry-wide analysis and actions.
Firms are still working hard, and in some cases struggling, to get things right in what are often complex and nuanced situations. Firms must look both at fitness and propriety and conduct rules” – Jill Lorimer, Kingsley Napley
Sarah Pritchard, the FCA executive director of markets and international, said: “We want this data to support financial firms by providing their management teams and boards with an opportunity to consider if they stand out, and, if so, why that might be. The data requires context and careful interpretation. But in being transparent we hope financial firms can benchmark themselves against their peers.”
Jill Lorimer, partner in the financial services regulatory team at Kingsley Napley, said the FCA viewed a firm’s culture as absolutely essential to “encouraging the right behaviours” and “helping to identify examples of counter-inclusive behaviour”. She added: “It is also keen to challenge any remaining concerns that these are purely HR issues rather than issues going to the heart of a firm’s regulatory compliance.”
Lorimer said the survey results represented a growing awareness of what non-financial misconduct was.
“However,” she added “in our experience, firms are still working hard, and in some cases struggling, to get things right in what are often complex and nuanced situations. Firms must look both at fitness and propriety and conduct rules. There can be weighty consequences to getting it wrong. It is particularly challenging for smaller firms without significant in-house legal and compliance resource, or indeed a wealth of precedent in the form of previous examples to fall back on.
“Most firms understand by now that the FCA wants to drive change in the financial services sector by bringing behaviour such as bullying, harassment and discrimination into its regulatory net. However, they still need practical guidance on when to engage the regulator and how to navigate this new territory.”
Firms urgently needed the publication of the FCA’s new rules in this area, which were expected imminently, added Lorimer.
Lloyds of London is looking to set up a new framework on personal misconduct mirroring FCA measures. Its consultation on the issue concludes in December.
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