On 25 October 2024, the FCA published the findings of its culture and non-financial misconduct ('NFM') survey. The results followed the FCA's February 2024 survey of 1,028 regulated wholesale firms (insurers, market intermediaries, banks and brokers) asking about recorded incidents of non-financial misconduct in 2021, 2022 and 2023.
The FCA's survey came in the wake of the evidence to the 'Sexism in the City' House of Commons' Treasury Committee, that pointed to significant cultural problems within financial services. That evidence also led to the March 2024 publication of the Treasury Committee's 'Sexism in the City' report which highlighted a series of recommendations for the FCA and Government after finding "shocking" levels of sexual harassment within the industry. Our analysis of that report can be found here.
Some of the high level statistics emerging from the survey are as follows:
- Incidents that were most likely to lead to dismissal included:
- possession or use of illegal drugs (21%)
- sexual harassment (22%)
- violence or intimidation (21%)
- Confidentiality agreements were used:
- most frequently for discrimination (124 times)
- bullying and harassment (42 times)
- infrequently for sexual misconduct and violence or intimidation
- never in respect of possession of illegal drugs
- In addition to reports of bullying, sexual harassment, violence and discrimination, many firms reported other types of NFM, not falling into those categories, including:
- intoxication or misuse of alcohol within the workplace or work-related environment (sometimes contributing to poor conduct and other inappropriate behaviour)
- inappropriate or offensive language or communication style within the firm or towards third parties (both verbally and in electronic communications)
- data protection and information technology security breaches such as inappropriate sharing, access, or misuse of confidential company information
- employees engaging in retaliatory behaviour in relation to allegations made against them
- misuse of expenses or gifts and hospitality
- performance issues and related conduct breaches
- breaches of firms’ policies and procedures
So, what should we expect next?
The FCA have stated that they will not be taking action as a result of the survey. They will, however, engage with firms to understand their results and how they have used the data to reflect on their own culture, particularly those firms that are outliers from their peers.
The FCA's recent work in this area certainly makes it clear that dealing with NFM appropriately, and creating a diverse and inclusive culture within financial services firms, are no longer "nice to have" but are now a "non-negotiable". We also await the FCA's policy statement, following on from its consultation paper CP23/20 on diversity and inclusion in the financial sector, which will set out its revised handbook rules on how instances of NFM may trigger breaches of COCON and the associated impact on an individual's fitness and propriety. In a letter to the Treasury Committee dated 29 November 2024, the FCA confirmed that it expects to publish its policy statement in early 2025 with their next steps on the D&I reporting part of the consultation paper coming in Q2 2025.