In a compelling initiative aimed at transforming workplace culture within the financial services sector, the Financial Conduct Authority (FCA) has released a significant survey that sheds light on patterns of non-financial misconduct across UK financial firms. Covering over 1,000 investment banks, brokers, and wholesale insurance companies, this survey chronicles a three-year journey, from 2021 to 2023, providing a thorough examination of the increasing concerns surrounding workplace conduct and company culture.
The findings are complex and detailed, and we’ve covered some of the key findings to support you in your company.
A Startling Upturn in Misconduct Reports
The survey's findings are striking complaints of non-financial misconduct have surged by a staggering 72%, with reported incidents escalating from 1,363 in 2021 to 2,347 in 2023. This sharp increase could well signal an urgent need for firms to reevaluate their workplace culture and address misconduct head-on. However, a more generous view would be the increase in reporting is as a result of clearer complaints and whistleblowing channels made available to staff who feel more empowered to speak out.
Prominent among the misconduct reported were bullying and harassment, which constituted 26% of the incidents. Discrimination was reported in 23% of cases, while the remaining 41% fell into the ambiguous “other” category, encompassing a variety of offences including intoxication, offensive language, and breaches of data protection. The majority of cases falling into this ‘other’ category demonstrates how non-financial misconduct does not fall easily into clear categories.
Sector Variations and Employee Population Dynamics
Diving deeper into the data, wholesale banks emerged as the sector with the highest frequency of reported misconduct, illustrating the correlation between larger employee bases and the visibility of misconduct incidents. Notably, these banks reported 7.9 incidents per 1,000 employees in 2023, significantly higher than the 6.1 incidents reported by both brokers and insurers.
The survey exposed alarming trends within the Lloyd's insurance market, where brokerages faced greater disciplinary actions and a marked prevalence of both intimidation and violence, raising concerns about the intrinsic workplace culture in this sector.
The Response: A Mixed Bag
While the numbers paint a concerning picture, the response from firms has been notably varied. A significant 43% of reported cases resulted in action taken by the companies involved, yet the results of these actions are sobering. For instance, 62% of discrimination complaints and 47% of bullying allegations were ultimately not upheld by the organisations surveyed. Moreover, there has been a welcome and noticeable decline in the usage of confidentiality and settlement agreements over the survey period, suggesting a shift towards more transparency and accountability.
Implications for Firms: A Call to Action
The FCA's survey is a crucial tool for financial firms, encouraging them to conduct introspective assessments of their practices. Organisations are recommended to take several essential steps, including:
Revising employee handbooks to clearly articulate expectations surrounding non-financial misconduct.
Regular employee training on non-financial misconduct; particularly through formats which is engaging and interactive e.g. videos of realistic workplace scenarios with follow-up questions.
Bolstering support for internal decision-makers tasked with handling conduct issues.
Creating robust whistleblowing policies to cultivate a culture where employees feel safe reporting misconduct.
Ensuring comprehensive oversight at the board level to prioritise non-financial misconduct within risk management frameworks and with designated accountable executives who own the risks and controls.
A Cultural Reflection and Compliance Call
The FCA emphasises the importance of cultural reflection at the board level, urging firms to compare their practices against the survey data to evaluate the effectiveness of their misconduct management. As the financial landscape grapples with the realities of non-financial misconduct, the FCA also reiterates the expectation for all firms to maintain compliance with prevailing regulatory standards. Firms that falter in adhering to these standards may face supervisory scrutiny, underscoring the importance of vigilance in managing workplace culture.
Future Directions: Engaging with the Findings
As the FCA aims to refine its supervisory processes using these insights, it also anticipates ongoing dialogue regarding the regulatory frameworks surrounding non-financial misconduct. Firms are encouraged to collaborate with trade associations to foster industry-wide enhancements and understand the systemic challenges that may persist.
It is worth highlighting the recent Parliamentary report that labelled the FCA’s culture as being ‘opaque and unaccountable’. Whilst this is a difficult read for the regulator it should not detract from regulated firms, or indeed firms seeking authorisation to set the highest possible standards in their own culture.
Partnering for Progress
As compliance consultants, at Leaman Crellin, we recognise the complexities within the FCA's findings. Navigating these challenges requires not only an understanding of regulatory expectations but also actionable strategies for cultural improvement. Our services include board briefings, policy reviews, the establishment of misconduct detection systems, and training programs that promote accountability and transparency.
In summary, the FCA's survey is a pivotal moment for the UK financial sector, illuminating the need for immediate action against non-financial misconduct. As the regulatory environment grows more stringent, it is imperative for firms to align their practices to uphold both stakeholder trust and a positive workplace culture. The path forward is clear: proactive engagement with these findings is essential for fostering a climate of respect, inclusion, and ethical conduct in the financial services industry.
At Leaman Crellin our team’s expertise is unparalleled. We offer tailored solutions on all financial regulatory and compliance matters from consultancy and training to insights and regulatory alerts, get in touch to see how we can support you and your business.
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