Late last month we delivered a webinar on moves by one of the UK’s two financial services regulators, the Financial Conduct Authority (‘FCA‘), to clamp down on harassment and bullying in the industry.
The FCA regulates around 50,000 businesses operating in the UK’s financial services industry. The UK’s second regulator in the industry, the PRA (Prudential Regulatory Authority) oversees a similar number of mostly larger organisations.
For those who could not join us, these are the headlines:
- The FCA recently consulted on proposed changes to its Handbook, specifically in relation to two chapters: COCON (the Code of Conduct) and FIT (the Fit and Proper test for Employees and Senior Personnel).
- COCON is being updated to include a specific new rule dealing with workplace harassment, and detailed guidance on how a breach of this rule may breach the individual conduct rules which govern the behaviour of FCA-regulated professionals.
- FIT (which relates to broader character assessments for certain FCA regulated individuals) is being updated with new guidance to reflect how non-financial misconduct generally – whether within work or outside of work – may impact an assessment of whether an individual is fit and proper to work in the industry.
The FCA will now consider the responses to the consultation proposals with final rule changes due to be published by the end of 2025 and taking effect from 1 September 2026.
The changes are sweeping and will require FCA regulated employers to consider allegations or suspicions of misconduct from a regulatory as well as employment law angle. New guidance supporting the rule updates will provide a comprehensive analysis of the multitude of factors that employers will need to take into account before reaching a balanced decision on the regulatory aspects in any given scenario.
Of particular note is that managers should try to prevent harassment and other non-financial misconduct concerns relating to their staff, or else may separately be alleged by the regulator to be in breach of COCON’s conduct rules.
The FCA’s new rules and guidance – which we anticipate will be finalised largely as drafted – respond to growing public awareness of sexual harassment and other non-financial misconduct in the financial services industry, especially in wake of the #metoo movement. The proposals reflect a growing trend in the approach of UK regulators to allegations of harassment in professional industries (not just in the financial services sector but also elsewhere, such as in the legal sector).
We have already started working with clients to prepare for these changes and to assist them to update their HR documentation, procedures and training to work within the new Handbook regime. Please see this article for considerations around potential steps HR professionals may consider taking.
