FCA’s non-financial misconduct survey to “place spotlight on weaknesses”

Law firm says companies must be prepared to engage with the regulators

FCA’s non-financial misconduct survey to “place spotlight on weaknesses”

Insurance News

By Terry Gangcuangco

Law firm Slaughter and May believes the Financial Conduct Authority’s (FCA) survey on non-financial misconduct (NFM) “will place a spotlight on weaknesses” in companies’ systems and procedures.

As reported by Insurance Business in January, the regulator is keen to find out how NFM cases – spanning harassment, bullying, discrimination, and other similar acts – in the industry are being detected and resolved, and has initiated an information-gathering exercise.

At an oral evidence session as part of the Treasury Committee’s ‘Sexism in the City’ inquiry, FCA executive director Sarah Pritchard said at the time: “In the supervisory work that we have just commenced, we are looking to firms to explain numbers of non-financial misconduct cases, methods of detection, and methods of resolution.”  

In the watchdog’s notice to provide information, the FCA is requiring all regulated Lloyd’s managing agents, London Market insurers, and Lloyd’s and London Market insurance intermediaries to complete a survey.

“The information collected will enable us to build a clearer understanding of when and where non-financial misconduct occurs, provide us with a baseline assessment of each sector, and inform our ongoing supervisory work programmes,” the regulator wrote in its letter to firms.

“The survey does not seek detailed information related to the specifics of allegations or investigations. We understand that not all allegations will be substantiated and that a higher volume of allegations collected by a firm is not necessarily indicative of a worse environment. We recognise that a high volume of incidents could, for example, indicate that there is an effective and transparent speaking-up culture within a firm.

“Conversely, where a firm is reporting nil-returns or a low volume of incidents, this isn’t necessarily an indication of an environment that is working well. There are also a wide range of outcomes that firms could use to respond to non-financial misconduct.”

Slaughter and May comments

In a commentary published on Lexology, Slaughter and May’s Nick Bonsall, Philippa O’Malley, Clare Fletcher, and Emily Bradley offered insights into the FCA’s undertaking.

“This survey will place a spotlight on weaknesses in the systems and procedures that firms have to mitigate risks relating to NFM,” they said.

“These firms must be prepared to engage with the regulators beyond the confines of this survey if any incidents of NFM are unearthed that should have been reported to the FCA, but were not, or where a systemic pattern of misconduct emerges.”

Slaughter and May sees NFM as a “fast-evolving landscape” for FCA-regulated companies to navigate and believes businesses should think about their broader employment law obligations when preparing their survey responses.  

“Casting the net wider, the survey provides a timely reminder for all regulated firms to review their processes for identifying, recording, and escalating incidents of NFM given the regulatory focus on this topic,” the lawyers added.

What do you think about this story? Share your thoughts in the comments below.

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!