FCA Rules on Non-Financial Misconduct: Comment & Insight

August is slipping away and on Sept 1st new rules from the FCA come into effect. Here’s some comment from NRF;

Paul Griffin, Head of Employment, Europe, Middle East and Asia, at Norton Rose Fulbright:

“As the FCA’s new non-financial misconduct rule and guidance take effect on 1 September, firms will need to be ready to investigate and respond to allegations quickly, fairly and consistently. While the FCA has provided additional guidance on workplace social events, social media activity and ongoing investigations, significant practical challenges remain. Employers should ensure their reporting channels, investigation procedures and support mechanisms are robust, particularly as regulatory expectations increasingly overlap with employment law obligations to prevent workplace harassment.

“The FCA is placing greater emphasis on leadership accountability. Senior managers are expected not only to address misconduct effectively when concerns are raised, but also to foster a culture in which concerns can be reported safely and escalated appropriately. Boards and leadership teams should receive meaningful management information on misconduct trends and outcomes to enable effective oversight of culture and governance. Regulators are focused not only on whether misconduct occurred, but on how organisations and senior leaders responded. All stakeholders, including compliance and HR teams, should be aligned from the outset to mitigate implications down the line.

“With implementation approaching, firms should review their policies, investigation frameworks, staff training programmes and reporting processes to ensure they are fit for purpose. Should individuals be found to have breached the non-financial misconduct rules, firms will need to consider the certification of those employees, creating a range of regulatory and employment issues. Those that take proactive steps now will be better positioned to strengthen workplace culture and reduce both regulatory and employment law risk.”

Katie Stephen, Co-Head of the Contentious Financial Services Group, London, at Norton Rose Fulbright:

“The FCA Handbook changes reflect the growing overlap between regulatory expectations and employers’ legal obligations, including the duty to take reasonable steps to prevent sexual harassment. Firms will increasingly need to consider not just the employment consequences of misconduct, but also whether it raises broader regulatory concerns.

“The FCA is not asking firms to police employees’ private lives, but it is making clear that serious misconduct can have regulatory consequences as well as employment ones. Where concerns are raised, firms may need to consider whether conduct outside the workplace is relevant to an individual’s fitness and propriety. They should also think carefully about how misconduct findings are taken into account in certification decisions and regulatory references.

“At the same time, firms are seeing a growing volume of whistleblowing reports and increasing scrutiny of workplace culture. This means that having robust processes for identifying, investigating and escalating concerns is more important than ever. Senior managers are not only expected to set a good example in terms of their own conduct but could also be challenged on whether they are doing enough to create the right environments for their teams.”