On 29 March 2021, the Financial Conduct Authority (FCA) published a Decision Notice withdrawing approval to a Mr F to perform senior management functions on the grounds of fitness. In addition, the FCA made an order prohibiting Mr F from performing a regulated activity under the Financial Services and Markets Act (FSMA).
Mr F was an independent financial advisor and sole director of Frensham Wealth Limited. The basis for the Decision Notice was Mr F's conviction, in March 2017 and whilst an approved person for the purposes of FCA enforcement, for attempting to meet a child following sexual grooming. He was sentenced to 22 months' imprisonment, suspended for 18 months.
The decision against Mr F is consistent with an enforcement approach by the FCA which seeks to sanction approved persons for non-financial misconduct, including sexual offences against children, voyeurism, sexual assault and non-financial misconduct committed inside and outside of the workplace.
In July 2018, a report on Sexual Harassment in the Workplace by the UK Parliamentary Women and Equalities Committee (the Committee) concluded that professional regulatory regimes had a crucial part to play in combatting sexual harassment in the workplace. The Committee found that regulators had previously failed to take a sufficiently active role in using their enforcement powers to sanction workplace harassment.
In evidence to the Committee, Megan Butler, Executive Director of Supervision – Investment, Wholesale and Specialists Division stated that a key objective of the Senior Managers and Certification Regime ("SMCR") (which replaced the Approved Persons regime in December 2019) was to hold leaders responsible for the cultural values of their businesses, and for determining whether key staff were "fit and proper" to perform their roles. The "fit and proper" test did not explicitly require a history of sexual harassment issues to be considered but the FCA expected "firms to take all of those aspects into account when they look at whether key individuals are fit and proper to do their roles".
In a subsequent letter to the Committee, Ms Butler confirmed that the FCA viewed "sexual harassment as misconduct which falls within the scope of our regulatory framework".
In its 6 January 2020 letter to the insurance sector, the FCA emphasised its expectation that business leaders should be pro-active in tackling non-financial misconduct. It stated that non-financial misconduct had been a "key root cause of recent major conduct failings within the industry. How a firm handles non-financial misconduct throughout the organisation, including discrimination, harassment, victimisation and bullying, is indicative of a firm's culture. … non-financial misconduct … will be a key focus for our supervision of firms and of senior managers".
The FCA's Decision Notice against Mr F is subject to review by the Upper Tribunal, following a referral by Mr F. The Upper Tribunal will consider whether to uphold the FCA's assessment that Mr F is not a fit and proper person on account of his criminal conviction.
There is a wider significance to this recent Decision Notice. It is indicative of a more aggressive approach by the FCA to investigating and sanctioning regulated persons for non-financial misconduct. The FCA's current enforcement priorities clearly place non-financial misconduct (including non-financial misconduct both inside and outside of the workplace) high on the agenda. That is consistent with one of the overriding objectives of the SMCR to "strengthen market integrity by making individuals more accountable for their conduct and competence". It is also consistent with Parliamentary and public expectation. We should expect to see more enforcement action for non-financial misconduct (both against regulated firms and individuals) in the coming months.