The U.K. Financial Conduct Authority’s (FCA’s) – Culture and non-financial misconduct survey – highlights challenges, gaps, and key trends in how firms detect, address, and prevent incidents of bullying, harassment, discrimination, and other forms of non-financial misconduct (NFM). Regulators are recognising the negative effects on workplace culture, compliance, and overall trust from these behaviours.
The FCA has been the most prescriptive in what is expected behaviourally of Senior Management and Certification Function roles when compared with ESMA and US regulators that embed behavioural expectations into existing regulatory obligations.
For senior compliance and RegTech executives, the survey provides both a warning and an opportunity: to reassess existing policies, enhance detection methods, and develop a culture that values accountability and transparency. Whilst the FCA declines to include best practices at this time, take aways from the survey offer firms a benchmark to assess where their GRC frameworks might require attention to meet emerging regulatory obligations.
Rising Trend of Non-Financial Misconduct
The survey results revealed a noticeable rise in the number of non-financial misconduct incidents reported between 2021 and 2023. This could be attributed to increased awareness, improved reporting mechanisms, or a broader willingness to acknowledge such behaviours. The heightened reporting indicates that firms may be adopting a more open approach to addressing misconduct, thereby fostering transparency.
However, the rise also suggests the need for proactive measures to counter these behaviours before they become ingrained. Senior executives must not only encourage a culture of openness but also ensure that the processes for reporting and addressing misconduct are well-communicated and trusted by employees.
Most Reported Misconduct Types
Bullying, harassment, and discrimination made up nearly half of all reported incidents, indicating persistent challenges in workplace culture across sectors. Additionally, a large portion of incidents was categorized as ‘other,’ covering behaviours like alcohol misuse, offensive language, or breaches of data security. This range suggests that non-financial misconduct remains a broad and evolving issue.
To address these behaviours, firms should reassess their policies to ensure inclusivity, respect, and accountability are core components of workplace culture. Firms need to explore targeted training and establish clear guidelines to address these widespread issues effectively.
Sector-Specific Variability
Each sector faced distinct challenges with respect to misconduct types. Wholesale banks, for example, reported the highest level of discrimination cases, while London market intermediaries had more incidents related to violence or intimidation. This sectoral variability highlights the importance of tailoring approaches to address specific challenges within different environments.
Compliance executives should perform sector-specific cultural diagnostics to develop customized mitigation strategies. By understanding these unique patterns, executives can implement more targeted training and remediation programs, thereby increasing the effectiveness of their response to misconduct.
Reactive vs. Proactive Detection
The survey found that most incidents were detected through reactive means—formal grievances or whistleblowing—indicating a lack of proactive detection efforts. Market surveillance and other firm-led initiatives were underutilized, suggesting that more could be done to proactively identify issues before they escalate.
GRC executives should prioritize investing in proactive detection tools including behavioural monitoring and enhanced analytics. Combining reactive and proactive methods will help firms identify issues earlier and take appropriate action, thus promoting a healthier and more compliant workplace culture.
Low Use of Disciplinary Action
Disciplinary actions were taken in less than half of reported cases, with significant variability depending on the type of misconduct. While severe cases such as violence were more likely to lead to disciplinary measures, other types like discrimination often did not. This inconsistency can undermine trust in the effectiveness of a firm’s misconduct policies.
To address this, senior leaders should establish clear guidelines on the consequences of non-financial misconduct and ensure these are applied uniformly across the organization. Consistent enforcement sends a powerful message that such behaviour will not be tolerated, ultimately strengthening the company’s culture of accountability.
Limited Use of Remuneration Adjustments
Remuneration adjustments following misconduct incidents were infrequent, and when they did occur, they mostly involved unvested variable pay rather than fixed salary or clawback mechanisms. This trend could limit the deterrence value of financial penalties, as employees may not perceive a real risk to their income in the face of misconduct.
Firms should reassess their approach to using remuneration as a deterrent for non-financial misconduct. Implementing stronger financial consequences, such as clawbacks, can reinforce the seriousness of policy breaches and act as a more effective deterrent.
Gaps in Policies and Governance
The survey identified gaps in critical policies and governance structures across the industry. Notably, 38% of firms did not provide their board or a board-level committee with information about non-financial misconduct, suggesting significant oversight gaps. Additionally, some firms lacked essential policies like whistleblowing procedures, undermining their ability to adequately address misconduct.
Compliance executives must close these gaps by ensuring all necessary policies are in place and regularly reviewed. They should also promote active board engagement in monitoring non-financial misconduct to enhance oversight and accountability, ensuring that leadership is fully informed about issues impacting the firm’s culture.
On a positive note, the use of confidentiality and settlement agreements has decreased over the three-year survey period, suggesting an increased emphasis on transparency. The FCA highlights that confidentiality agreements should never be used to prevent disclosures made in the public interest, underscoring the need for careful application of such agreements.
Compliance teams should re-evaluate how and when confidentiality agreements are used. It is essential to ensure that these agreements do not hinder whistleblowing or the reporting of misconduct to regulatory bodies, thereby supporting a culture of openness and accountability.
The survey highlighted the need for stronger engagement from boards in handling non-financial misconduct. Many firms lacked board-level visibility into misconduct issues, which limits their ability to provide appropriate strategic direction and to ensure adequate cultural oversight. Boards must play a more active role in promoting a healthy workplace environment.
Executives should work to ensure boards receive comprehensive and timely reporting on non-financial misconduct. This will ensure that senior management is not only aware of these issues but can also set the tone from the top, driving cultural improvements across the organization.
Benchmarking and Next Steps
The FCA’s survey highlights the imperative for firms to proactively address non-financial misconduct. Executive committees and boards are encouraged to review their oversight and governance frameworks. Firms should reassess their policies and procedures to ensure they effectively detect, prevent, and manage incidents of bullying, harassment, discrimination, and other forms of misconduct. Cultivating a culture that prioritizes accountability and transparency is essential.
By benchmarking against the survey’s findings and addressing any gaps, firms can align with regulatory expectations and promote higher standards across the industry.
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