The Financial Conduct Authority (FCA) is sharpening its focus on non-financial misconduct and taking a stricter stance on those failing to promote integrity and high standards of workplace culture within the financial services sector. With an ever-growing surge in allegations of non-financial misconduct, it is important that financial services companies take allegations of abuse and harassment very seriously.
A culture where individuals are able to challenge inappropriate behaviour is regarded by the FCA as essential to effective risk management. In October 2024, the FCA published a survey of over 1,000 wholesale financial service firms outlining the rise in allegations of non-financial misconduct between 2021 and 2023. Bullying and Harassment (26%) and Discrimination (23%) were the most widely reported types of non-financial misconduct. This survey followed the Treasury Committee's "Sexism in the City" report in March 2024 which highlighted sexism, poor workplace cultures and unconscious bias, remain ongoing problems.
Significant sanctions for inappropriate conduct
Senior managers play a crucial role in fostering a healthy workplace culture and ensuring compliance, accountability and effective governance to reduce the risk of non-financial misconduct. The FCA has demonstrated it will impose significant sanctions on senior managers who flout the rules, as the disciplinary decision against Mr Odey below highlights.
In a recent decision, the FCA has prohibited Senior Manager, Mr Crispin Odey, from performing regulated activities in financial services due to his lack of integrity. He has been personally fined £1,835,200.000, calculated as 30% of his income for a 12 month period preceding the end of the breach period, uplifted on account of aggravating factors, and then doubled for deterrence.
The FCA's decision focused on Mr Odey's behaviour in the context of disciplinary proceedings against him in his capacity as founder and majority owner of Odey Asset Management LLP (OAM). Following allegations of sexual misconduct made against him by employees, the FCA commenced an investigation into the allegations and OAM's handling of the same. In response, Mr Odey used his majority shareholding to alter the membership of OAM and appoint himself as sole member, which then left him unaccountable and able to protect his own interests. The FCA found his conduct demonstrated a blatant disregard for OAM's adherence to regulatory requirements, including the FCA Handbook. It also concluded he was deliberately trying to frustrate the disciplinary investigation, and he is not fit to perform any function in relation to regulated activities. Mr Odey has referred the decision to the Upper Tribunal.
What steps can financial service companies take?
The Odey case highlights the regulatory risks and reputational damage that organisations may face if they fail to tackle non-financial misconduct appropriately.
It is imperative that senior managers in financial institutions and across the financial sector assess and identify any areas that do not support a "speak up" culture, and implement flexible principle-based policies which can be applied, possibly alongside existing grievance and whistleblowing reporting processes, to allow employees to raise concerns of non-financial misconduct. When concerns are raised, it is essential that the company responds swiftly, and the allegations are investigated sensitively and appropriately.
The FCA has voiced concerns about the misuse of Non-Disclosure Agreements (NDAs), where organisations use confidentiality clauses and agreements to cover up incidents of abuse, harassment and discrimination. NDAs have been widely used in sexual harassment cases to protect companies (and the perpetrator) from reputational damage and make "problems go away" by removing the ability for the victim to share their experience. The FCA accepts there may (occasionally) be reasons why NDAs are used, but it is alive to their misuse and is calling for such agreements, if used, to contain an explicit clause that allows for protected disclosure to regulators and law enforcement agencies. This will enable to FCA to scrutinise their use more easily.
The FCA has non-financial misconduct high on its agenda and its "next steps" rules and guidance are expected by the end of June 2025. The FCA's approach will align with other legislative measures intended to stamp out harassment and abusive workplace cultures, including the new proactive duty on sexual harassment (introduced in October 2024) and the proposed sexual harassment provisions in the Employment Rights Bill (expected to come into force in 2026).
Companies need to be taking steps now to embrace a healthy workplace culture with policies and processes in place, and clear training and signalling to all workers that inappropriate conduct will not be tolerated.
