Misconduct crackdown as September beckons

The number of misconduct reports to the Financial Conduct Authority (FCA) has doubled in the past five years, after a series of industry scandals highlighted the reputational and regulatory risks involved

Employment lawyers point to increased vigilance, with managers willing to investigate and deal with allegations of inappropriate behaviour they might historically have considered borderline or not worthy of disciplinary action. The tougher approach may be inspired by the FCA finalising its guidance on non-financial misconduct, which comes into force in September.

Some 4,224 conduct breaches were reported in 2024, up 10% from 3843 the previous year, according to figures gathered by employment lawyers Littler. Misconduct reports can range from misleading clients or giving negligent advice to non-financial breaches such as sexual harassment. Recent high-profile misconduct cases include that of hedge funder Crispin Odey, who is currently challenging the FCA ban in the Upper Tribunal, and former Barclays CEO Jes Staley, who the FCA banned from holding senior roles in the financial industry.

Sophie Vanhegan, partner at Littler, said: ‘With the increased focus on non-financial misconduct and broader workplace culture over the past few years, very few financial services firms are willing to take chances over allegations of misconduct by their staff.

‘They know that properly investigating allegations of misconduct, and where appropriate, timely reporting to the regulator, is key to maintaining a healthy workplace culture and supporting a strong relationship with the regulator, as well as putting them in a strong position from a reputational standpoint if news of the misconduct gets into the public domain.

‘With the finalising of the new guidance on non-financial misconduct by the FCA, including the introduction of a new “anti-harassment” rule in the Code of Conduct, firms now have greater clarity from the regulator on how the FCA expects allegations of non-financial misconduct to be handled and when it may have regulatory implications.’