It is clamping down on ‘rolling bad apples’ who move from firm to firm to avoid the consequences of their own action. Under the new rules, ‘serious, substantiated’ cases of poor personal behaviour will need to be shared through regulatory references.
Previously, it was unclear when this type of behaviour would be a breach of the conduct rules in a firm other than a bank.
FCA deputy chief executive Sarah Pritchard said: ‘Behaviour like bullying or harassment going unchallenged is one of the reddest flags—a culture where this occurs can raise questions about a firm's decision making and risk management.’
To help firms apply the rules, the FCA has issued draft guidance, ‘Tackling non-financial misconduct in financial firms’, open for consultation until 10 September.
Christine Braamskamp, managing partner, Jenner & Block, highlighted the draft guidance requires senior managers to protect staff from non-financial misconduct by ‘intervening to stop such behaviour where appropriate if the manager knows or should know of it’.
This could ‘place a very significant personal burden on senior managers to take action in potentially nebulous circumstances in an era where cancel culture is rife, and offence can sometimes be in the eye of the beholder’, Braamskamp said.
Braamskamp said the draft guidance also noted an individual’s life outside work or on social media might affect their fitness for a regulated role. She called for more clarity and examples to help firms understand their duties.
Rachel Couter, partner, Osborne Clarke, welcomed the FCA’s decision to scrap earlier plans to amend its ‘FIT’ test for candidates with reference to ‘vague concepts of “moral soundness, rectitude and steady adherence to an ethical code”.
‘This should allow more consistency in interpretation and application of the rules, both by regulated firms and those within the regulators themselves. The FCA has also helpfully expressly confirmed that firms are not expected proactively to monitor employees’ private lives.’
James Alleyne, partner at Kingsley Napley, said: ‘Given the FCA’s bold public stance on non-financial misconduct before now, it is disappointing that it is undertaking yet another consultation, has watered down its previous proposals and is still yet to publish detailed guidance.’
