City regulators crack down on non-financial misconduct
The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are strengthening their expectations on how regulated firms handle non-financial misconduct, such as sexual harassment.
The regulators have set out proposals to boost diversity and inclusion in financial services, with new rules and guidance around misconduct, including bullying.
Their proposals set higher minimum standards, with more requirements on larger firms.
Under the new plans, firms will need to develop a diversity and inclusion strategy setting out how the firm will meet their objectives and goals; to collect, report and disclose data against certain characteristics; and to set targets to address under-representation.
Read more: BBB and Landbay among 79 businesses to meet Women In Finance Charter targets
“For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, its vital they attract, retain and promote the best talent,” said FCA chief executive Nikhil Rathi.
“The data suggests this isn’t happening. Our proposals will encourage the largest firms to put in place plans and report against their delivery.
“UK financial services has long been a magnet for best-in-class talent globally. Increasing levels of diversity within firms can help attract and unlock talent, supporting the sector’s international competitiveness.
Read more: Fintechs reveal worsening gender pay gap
“We have taken a lead among regulators in taking a clear stance that non-financial misconduct, such as sexual harassment, is misconduct for regulatory purposes. We’re strengthening our expectations on how the firms we regulate consider such misconduct when deciding whether someone is fit and proper to work within theindustry.”
The regulators highlighted that the new framework will be flexible and that firms will need to come up with their own solutions. Most of the requirements would only apply to the largest firms.
The proposals build on previous government-led work such as the Treasury’s Women in Finance Charter and the Parker and FTSE Women Leaders Review.
The consultation is open until 18 December 2023. The feedback will be used to develop final rules planned for publication in 2024.
Read more: FCA cracks down on financial promotion approvals
“It is now clear that senior management will have personal accountability for ensuring that this type of misconduct is addressed or face regulatory sanctions,” said Alison McHaffie, a financial services partner with law firm CMS. “Also, FCA’s emphasis on serious misconduct leaves the problem of definition. Decisions are never going to be binary, determining which actions are sufficiently serious to constitute a breach will remain an area of judgement and potential difficulty for firms.”