Last week, the UK Financial Conduct Authority (FCA) released the results of its probe into how firms handle matters of culture and non-financial misconduct.
In early 2024, the FCA sent a survey to 1,028 firms, asking them to provide more information about recorded incidences of non-financial misconduct between 2021 and 2023. "This was the first comprehensive non-financial misconduct data gathering exercise across these sectors and a significant step in understanding this subject matter, providing a baseline assessment of behaviours," the FCA said.
The survey found that, in those three years, the number of misconduct cases reported increased each year. While the distribution of the specific types of misconduct reported varied across industries, bullying and discrimination were the most common, comprising 26% and 23% of cases, respectively.
The FCA argued that non-financial misconduct and the fitness of individuals in the industry pose a risk to firms and the FCA's ability to deliver on its objectives. "A corporate culture that tolerates sexual harassment or other non-financial misconduct is unlikely to be one in which people feel able to speak up and challenge decisions, or one in which they will have faith that concerns will be independently and fairly assessed," the FCA explained.
Notably, the FCA's emphasis seems to be on ensuring firms do not "tolerate" misconduct and that they have the proper "processes, systems and controls" to identify and punish those responsible after it has been reported. "We expect firms to have effective systems in place to identify and mitigate risks of all kinds," the FCA said. “Should allegations or evidence of non-financial misconduct come to light, we expect a regulated firm to take them seriously through appropriate internal procedures.”
However, as Starling Founder & CEO Stephen Scott argues in a recent Weekend Reading article, a focus on policy and process alone is unlikely to change the culture driving employee misconduct. Rather, he urges leaders to attend to the cultural factors that will allow them to become preventative regarding misconduct: their people, presumptions, and practices. ▸ Read More
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