Wealth Sector Welcomes UK Regulator's Non-Financial Misconduct Report

Tom Burroughes

28 October 2024

The UK’s wealth sector has welcomed moves by the country’s financial regulator to try to stamp out non-financial misconduct (NFM) such as bullying and discrimination in the workplace.

Last week, the issued a 34-page report, which described a three-year survey of the problem.

The FCA’s study found, for example, that the distribution of non-financial misconduct types varied by sector although bullying and harassment (26 per cent) and discrimination (23 per cent) were the most reported types of non-financial misconduct across all sectors.

It also found that 41 per cent of non-financial misconduct incidents were reported in the “other” category. Firms identified incidents through reactive routes such as grievances or similar formal processes (50 per cent) and through alternative reporting routes such as whistleblowing.

"We welcome the regulator’s decision to survey the information about recorded incidents of non-financial misconduct in financial services industry and thus shed more light on the challenges firms face when handling the instances of non-financial misconduct,” Liz Field, CEO of PIMFA, the UK trade association for the wealth sector, said. “In our response to the discussion paper on diversity and inclusion, we supported embedding non-financial misconduct into Fitness and Propriety assessments and the Conduct Rules.”

"For our part, PIMFA will be developing guidance for our sector as firms need to be clear of their responsibilities. The lack of guidance could lead to a significant amount of cost, time and pressure for organisations as they try to grapple with these issues. This is particularly important for firms which do not have extensive compliance and HR resources,” Field said.

Jill Lorimer, partner in the financial services regulatory team at Kingsley Napley, the law firm, said: “The FCA has talked about the importance of non-financial misconduct (NFM) for several years now but is aware that education is a key part of its wider strategy to drive up standards.”

“It views a firm’s culture as absolutely essential to encouraging the right behaviours and indeed helping to identify examples of counter-inclusive behaviour. It is also keen to challenge any remaining concerns that these are purely HR issues rather than issues going to the heart of a firm’s regulatory compliance,” Lorimer said.

Other details
In other details, the FCA said firms noticed incidents through firm-led detection methods such as market surveillance. In the survey, firms could report multiple detection methods for one incident.

Disciplinary or ‘other’ actions were taken in 43 per cent of cases. In the remainder, the FCA saw a range of other outcomes – either the cases were not investigated, could not be concluded or upheld, upheld with no other action, or investigations were ongoing.