The FCA has published the results of a survey that it carried out to better understand how firms record and manage allegations of non-financial misconduct. 

The survey involved over one thousand investment banks, brokers and wholesale insurance firms and it found that the number of allegations reported increased between 2021 and 2023. The number of reported non-financial misconduct incidents increased over the three years surveyed.

The distribution of non-financial misconduct types varied by sector, although bullying and harassment (26%) and discrimination (23%) were the most reported types of non-financial misconduct across all sectors. 

Firms identified incidents through reactive routes such as grievances or similar formal processes (50%) and through alternative reporting routes such as whistleblowing. Firms also identified incidents through firm-led detection methods such as market surveillance.

Disciplinary or other actions were taken in 43% of cases. There were a range of outcomes in the remainder.  Either the cases were not investigated or unable to conclude, not upheld, upheld with no other action, or investigations were ongoing.

Some types of reported non-financial misconduct, such as violence and intimidation, more often resulted in disciplinary actions compared to other types, such as discrimination.

The total number of confidentiality and settlement agreements signed by complainants fell over the three years surveyed, according to the data from the wholesale banks sector. The data from other sectors showed no clear trend. 

Discrimination, with 23% of cases on average across all sectors, had the highest percentage of incidents resulting in the complainant signing either a settlement or confidentiality agreement.

In all sectors, action taken following non-financial misconduct rarely resulted in remuneration adjustment. When remuneration was adjusted it was mostly against unvested variable pay.

Some relevant policies, like whistleblowing and disciplinary policies, were not in place at all firms surveyed.

The findings are being shared to enable firms to benchmark their own reporting against the FCA’s analysis and consider if their processes for reporting and investigating possible non-financial misconduct remain appropriate. Trade associations will play a key role in coordinating industry-wide analysis and actions. 

Next steps

The FCA is not publishing best practice or guidance to firms now, because it is considering feedback to its consultation about diversity and inclusion in the financial sector. It will publish its finalised policy in due course, including on how non-financial misconduct should be considered within FCA rules.

In the meantime, the FCA expects firms to:

• discuss non-financial misconduct at senior management and board level;
• consider whether they need to take steps to improve their culture, how they identify and manage risks, how they address non-financial misconduct on an ongoing basis;
• consider whether employees are enabled to speak up about non-financial misconduct and establish or revise processes as necessary;
• consider whether they have in place effective systems to identify, investigate and remedy promptly and fairly allegations when substantiated.

The FCA acknowledges that the approach adopted by firms may vary according to their size and the nature of their operations.  However, the approach will need to be sufficient to ensure firms are complying with their regulatory responsibilities and reporting requirements.  Firms who carry out this review work now will be well prepared for when the FCA publishes it revised rules and guidance on diversity and inclusion and non-financial misconduct, which are due to be published by the end of 2024.