The FCA has published a letter from Megan Butler, Executive Director of Supervision, to Maria Miller MP, Chair of the House of Commons’ Women and Equalities Committee in relation to sexual harassment in the workplace. Ms Butler details how the FCA views non-financial misconduct, in particular sexual harassment, as coming under its regulatory ambit predominantly in connection with how it assesses a firm’s culture and individual fitness and propriety. The content of the letter serves as a reminder to firms of their obligations and indicates the FCA’s expectations in some respects.
Ms Butler indicates that the FCA would see a culture where sexual harassment is tolerated as being indicative of an overall culture which does not allow for decisions to be challenged and consequently would fall below the standard the FCA expects. The FCA takes a holistic approach to evaluating a firm’s culture, considering the extent to which it is shaped by factors such as remuneration, inclusion and diversity. Given this approach, it is vital that firms review their culture holistically to ensure that a firm is not only upholding the FCA’s standards in relation to financial conduct but also personal conduct. The FCA will consider any sexual misconduct, or other non-financial misconduct, when evaluating an individual’s fitness and propriety. The FCA suggests that this is relevant under the approved persons regime, senior managers under the SM&CR and should extend to when firms assess whether certified staff are fit and proper. It is therefore important that firms, when making determinations about senior managers, certified staff or approved persons, examine beyond the individual’s financial conduct and consider their wider behaviour and whether it is compliant with the FCA’s standards.
In addition, Ms Butler highlight firms’ reporting obligations to the FCA under Principle 11 and individual conduct rules. The FCA would expect to be informed promptly of any potentially serious misconduct involving firms’ employees and firms should be able to demonstrate that they have the right processes to handle such cases. If the misconduct involves the most senior staff at the firm, the FCA would expect notification within seven days under the SM&CR. It is also important for firms to have robust processes in place to deal with any cases of serious misconduct and sufficient whistleblowing and complaints procedures in place.