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February 12, 2024
Banks and the wholesale insurance sector should prepare to receive a survey from the FCA requesting data on non-financial misconduct as the regulator begins its investigation into how incidents are detected and handled in the financial services sector.
The regulator has confirmed it has sent a letter to wholesale insurers and intermediaries on 6th February requesting data on incidents of non-financial misconduct and how they are dealt with, and that banks and brokers will be next to be contacted.
The survey forms part of the FCA investigation into non-financial misconduct and use of non-disclosure agreements (NDAs) following the Treasury Committee’s Sexism in the City inquiry, during which MPs heard that the financial services sector remained an ‘old boys club’ where harassment and bullying is prevalent, and victims are frequently silenced by non-disclosure agreements (NDAs).
In the letter sent to firms, the FCA has emphasised its view that “non-financial misconduct is misconduct and not an additional principle”, and stated that it intends to use information gathered via surveys to gain a “clearer understanding of when and where non-financial misconduct occurs, provide […] a baseline assessment of each sector and inform our ongoing supervisory work programmes”.
The compulsory survey requests three main points of data covering the past three years; the number and type of non-financial misconduct incidents recorded, the method of detection, i.e. discovery via whistleblowing or surveillance, whether incidents led to dismissals, warnings or no action, and the number of further outcomes, such as NDAs or tribunals.
The survey will also include high level questions on; regulatory references, governance and management information, Appointed Representatives, diversity and inclusion policies and remuneration, disciplinary and whistleblowing policies and procedures.
The data must include incidents of misconduct that occurred at the office, when working from home or off-site or during any work-related social events. The involvement of senior managers in incidents should also be noted.
The regulator has clarified that it is not seeking detailed information regarding the specifics of any incidents and recognises that “a higher volume of allegations collected by a firm is not necessarily indicative of a worse environment”.
The investigation follows a period of mounting concern and scrutiny regarding non-financial misconduct in the sector. In the last two years, the FCA received 200 allegations of non-financial misconduct and, in 2022, Atrium Underwriters were fined £1 million for ‘serious failures’ to prevent discrimination, harassment and bullying.
With only a four-week response time to collate and deliver the data, firms should engage with their governing bodies, senior managers, compliance teams and HR personnel to begin compiling all relevant information they will require to demonstrate full accountability and transparency on these matters.
