UK’s City watchdog expands guidelines on bullying and harassment | USAEMALL.com

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Tens of thousands of UK financial services companies will have to report serious bullying and harassment by senior employees to regulators and future employers, under proposals announced on Wednesday.

The Financial Conduct Authority said it would extend rules on non-financial misconduct beyond banks to 37,000 other financial services groups from September 2026. It aims to tackle the “rolling bad apples” problem of people moving between companies to avoid the repercussions of their behaviour.

The watchdog said: “Serious, substantiated cases of poor personal behaviour will also need to be shared through regulatory references, in the same way financial misconduct currently is, making it harder for individuals to avoid consequences by moving from firm to firm.”

The category of “non-financial misconduct” covers complaints ranging from sexual harassment and racism to illegal drug usage and offensive language.

The move underscores rising awareness and reduced tolerance of bullying and harassment in financial services after a series of high-profile cases.

A survey of more than 1,000 companies published by the FCA last year revealed a two-thirds rise in reports of non-financial misconduct across the UK financial sector, with 7.2 incidents being reported per 1,000 employees in 2023, up from 4.2 incidents in 2021.

“Too often when we see problems in the market, there are cultural failings in firms,” said Sarah Pritchard, the FCA’s deputy chief executive. “Behaviour like bullying or harassment going unchallenged is one of the reddest flags — a culture where this occurs can raise questions about a firm’s decision making and risk management.”

Claire Cross, a partner at law firm Corker Binning and former FCA official, predicted there would be a surge in reports about non-financial misconduct to the watchdog, even though many companies have been treating the rules for banks as if they applied to them.

“Firms newly subject to the rules are unlikely to risk criticism for failing to report and so will err on the side of caution in borderline cases,” she said. “Individuals will need to be prepared to fight their corner on what does, and does not, need to be reported.”

The watchdog asked for feedback on whether “further guidance would be helpful and proportionate” for companies as they implement the changes. 

This would include guidelines on how non-financial misconduct should affect the test of whether someone is “fit and proper” to work in financial services. It would also cover “use of social media and the relevance of behaviour in private and personal life”.

However, the FCA has backed away from some proposals it outlined two years ago, including one to allow supervisors to reassess a company’s “suitability to undertake regulated activities” over a finding of non-financial misconduct.

The rule will apply to all companies that are bound by the senior managers and certification regime, which was introduced in 2016 to make top financial executives accountable for wrongdoing or failings under their watch. It does not include payment and e-money firms, regulated investment exchanges or credit rating agencies.

The FCA has been under pressure from the government to do more to support economic growth and competitiveness. This year it abandoned several of its more controversial proposals, including one to “name and shame” more of the companies it investigates and another to make companies disclose more about their diversity and inclusion policies.