Reports of non-financial misconduct have risen significantly since 2021, with bullying and harassment, and discrimination listed as key concerns. “Bullying and harassment were identified as significant issues, making up 26% of reported cases, while discrimination accounted for 23% of the reports” (Financial News: FCA’s survey reveals rise in misconduct reports). The FCA is said to have “found a shocking prevalence of sexual harassment and bullying” as well as “a culture which is holding back women” (Financial Times: Bullying and harassment claims rise across City, regulator finds).
On the flip side, these increased reports could also suggest firmer internal guidelines on ethical workplace practices raising acceptability standards, and the willingness of employees to report negative behaviours.
The published review precedes the FCA’s upcoming policy on non-financial misconduct, which is likely to introduce stricter standards for banks and other firms across the financial services sector (The Banker: Reports of non-financial misconduct on the rise says FCA).
“Earlier this year the FCA asked more than 1000 regulated financial firms including banks, insurers, brokers and market intermediaries, to report all non-financial misconduct. Worryingly incidents across all sectors grew by more than two thirds. The current market is very competitive, and culture is a deciding factor for many professionals when accepting or rejecting a job, in some cases more important than the responsibilities of the role! By being transparent about your culture and taking a strong stand on conduct and company values, you’re more likely to attract top tier talent that your competition won’t have access to. The most successful companies partner with recruiters who have the expertise to promote your company values and brand, ensuring the right message lands well in the market. Not only does this help you hire the best talent, but also helps your brand stay top of mind for professionals,” says Jack Johnson, Business Director for Risk and Compliance at IDEX Consulting.
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If you’re looking to hire top talent or looking for a new role across the financial services industry, especially in the Risk & Compliance market, contact Jack Johnson who will be happy to provide specialist advice.
The concerning results paired with the upcoming FCA policy on non-financial misconduct gives firms a crucial reason to proactively raise internal standards and strengthen practices. Findings from the review are offering firms the chance to improve their workplace culture in ways that strengthens accountability and integrity whilst reducing risks associated with inadequate practices.
Results from the survey highlight that“92% of firms state that they would highlight examples of non-financial misconduct in a regulatory reference”. A following 87% stated they would go as far as to update a reference following an incident (Latham & Watkins: FCA Publishes Results of Non-Financial Misconduct Survey).
Yet, findings from the same investigation confirm that incidents of bullying and other forms of non-financial misconduct in the UK’s finance sector have increased by over 67% in the last three years (Financial Times: Bullying and harassment claims rise across City, regulator finds).
The difficulty of definition
It is important to remember that the nature of this topic presents some challenges and grey areas. The scope of non-financial misconduct ranges from violent assault to bringing pets into the workspace (Financial Times: Bullying and harassment claims rise across City, regulator finds). Given the element of subjectiveness that can exist across the category, particularly in regard to less extreme incidents, some records may be unverified with others containing possible factual errors.
The FCA are also facing the challenge of defining what the rise in reports suggests when tailoring an actionable plan for the industry. The regulatory body has expressed concern that the data could be suggesting that firms might be failing to meet expectations in suitable governance and management of non-financial misconduct, including out of date whistleblowing policies (Latham &Watkins: FCA Publishes Results of Non-Financial Misconduct Survey). Uncertainty also arises when factoring in the possibility that an increase in reports could equally imply a positive workplace culture where people feel empowered to speak up. Data therefore always needs to be interpreted with caution.
Evolving attitudes towards the workplace environment are another factor to consider during the debate of a ‘good’ vs ‘bad’ culture in light of increased misconduct reports. Improved internal systems have allowed, and even regularly prompted, employees to share their experiences anonymously. Recent years have also seen a significant shift in awareness and education on appropriate workplace behaviour (Travers Smith: FCA findings on non-financial misconduct). Even with a hypothetical absence of formal regulatory pressure, society’s developments and standards on what should be tolerated in corporate culture is enough to equip employees with appropriate information to recognise and challenge misconduct.
Outcomes
Reports show that “disciplinary action or similar was taken in 43% of cases overall” (Latham & Watkins: FCA Publishes Results of Non-Financial Misconduct Survey). When comparing sectors, insurance companies took disciplinary action in 63% of cases, with 21% of incidents not being upheld, whilst wholesale banks didn’t uphold 45% of instances.
The most common forms of misconduct which resulted in disciplinary action were behaviours that included violence, intimidation and sexual harassment. Repercussions involved a written warning, training or coaching, with disciplinary action hardly ever taking into consideration changes to remuneration. Although some cases involving sexual harassment, illegal drugs and violence were likely to result in dismissal.
What firms should be aware of
Irrespective of the challenges around the topic, the FCA expects firms to assess their internal processes against the latest findings, develop strategies for continued improvement in the workplace, and guarantee that standards for non-financial misconduct mitigation and management are upheld.
In addition, to avoiding harmful or unlawful practices, regulatory compliance helps firms build healthy and inclusive cultures, retain talent, protect their reputation and safeguard revenue. Reputational damage, especially in relation to bullying and harassment severely impacts investor interest, results in revenue loss and serious legal consequences.
What to do next
This year marks the first time the regulator has conducted this type of investigation, aiming to enhance transparency across the sector. The FCA has emphasised its expectation for firms to proactively implement processes to improve workplace culture, drive the right behaviours from senior leadership and do everything they can to embed supportive environments. Despite onus on firms to drive changes from board level, 38% of firms reported that boards and board-level committees did not receive information of non-financial misconduct (A-Team: FCA Survey Reveals Gaps in Governance and Policy on Non-Financial Misconduct).
In addition, many larger firms expressed concern that they lacked a formal governance structure to oversee disciplinary actions.FCA’sExecutive Director of Markets and International Sarah Pritchard, emphasised the need for firms to use the information at hand to assess their own cultures and processes, stressing the importance of healthy workplace culture and warning the risks associated with neglecting non-financial misconduct (FCA: FCA Publishes Results of Non-Financial Misconduct Survey).
The outcome of this investigation has revealed notable gaps in policies and procedures for firms across the financial services insurance sectors, especially around out of date practices which are failing to meet FCA guidelines. The FCA believes this review will drive ongoing improvements in culture, although they will not be issuing new best practice recommendations at this time. Instead, the regulator expects firms to use the data provided to effectively detect and address issues. Full compliance with existing regulatory responsibilities and reporting requirements is mandatory with any short-fallsset to result in negative consequences for firms (FCA: Culture and Non-Financial Misconduct Survey – Findings).
For more information on the data shared in this article or if you’re looking for support with your hiring strategy speak to a consultant who can assist in providing market intelligence, and a range of hiring solutions.
Sources:
A-Team: FCA Survey Reveals Gaps in Governance and Policy on Non-Financial Misconduct
FCA: Culture and Non-Financial Misconduct Survey – Findings
FCA: FCA Publishes Results of Non-Financial Misconduct Survey
Financial Times: Bullying and harassment claims rise across City, regulator finds
Latham & Watkins: FCA Publishes Results of Non-Financial Misconduct Survey
The Banker: Reports of non-financial misconduct on the rise says FCA
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