On 12 September 2024, Lloyd's of London ('Lloyds') released a proposed new conduct framework, aimed at modernising and streamlining its methods for addressing improper conduct and behaviour in the marketplace, covering both financial and non-financial wrongdoing.
Acknowledging that their existing procedures for handling misconduct lack clarity, they confirmed that the proposed framework aims to, among other objectives:
- Offer clearer guidance on the types of conduct or behaviour Lloyd's deems unacceptable, particularly regarding non-financial misconduct, and detail the circumstances and methods of Lloyd's involvement;
- Synchronise Lloyd's Enforcement and Oversight roles to facilitate a more integrated approach to case management, positioning Oversight intervention at the core of this strategy, while retaining Enforcement as an option when required; and
- Refine Lloyd's internal decision-making protocols to ensure decisions are reached more swiftly and uniformly, while still maintaining essential procedural protections.
The proposed updates include revising the Byelaws to clarify that misconduct does not require evidence of harm at the institutional level of Lloyd's to be actionable. Certain behaviours, such as illegal drug use, harassment, or bullying, are inherently unacceptable and can be addressed as misconduct regardless of direct harm to Lloyd's or its market. Additionally, misconduct is not confined to professional settings and can occur outside of work, especially when there is a significant link to the Lloyd's market, including the involvement of other market participants, aligning with the approach of the FCA.
The proposals also aim to establish a new category of misconduct for deliberate or repeated violations of the ‘Principles For Doing Business at Lloyd's’, which are now well-established. This move seeks to create a direct connection between these Principles and the Lloyd's Enforcement process for cases where Enforcement is deemed appropriate. Moreover, a specific category of misconduct will be created to address the mistreatment of witnesses and whistleblowers, ensuring protection for those who report wrongdoing.
The consultation indicated that Lloyd's would take measures against any insurer found to be underperforming due to poor culture or behavioural issues. Such measures could result in the revocation of the firm's authorisation to operate within the Lloyd's market.
Comment
Like the FCA, Lloyd's is committed to dealing with non-financial misconduct and in many respects, Lloyd's is already ahead of the FCA. In 2022, we reported how Lloyd's had fined Atrium Underwriters Limited for serious failure by the firm and its underwriters, including failing to deal with bullying and sanctioning an annual "boys night out" during which unacceptable behaviour was tolerated.
These proposals are intended to provide clarity on when and how Lloyd's will intervene to use its enforcement powers. Like the FCA, Lloyd's makes clear that primary responsibility for dealing with misconduct by individuals lies with firms themselves.
Feedback on the consultation is required to be submitted by 16 December 2024.