Key findings of the Financial Conduct Authority's culture and non-financial misconduct survey results for UK firms

Prior to the long-awaited FCA's guidance on non-financial misconduct, due to be published later this autumn, on 25 October 2024 the FCA published its key findings following a survey, issued in February 2023 to 1,028 firms enquiring about recorded incidents of non-financial misconduct between 2021 and 2023. In total 984 firms responded to the survey. 

It will be no surprise to practitioners that the survey responses recorded a stark increase in the number of reported cases of non-financial misconduct with incidents up from 1,363 in 2021 to 2,347 in 2023. Whilst bullying, harassment and discrimination made up a total of 49% of total incidents reported, the remaining 41% of reported cases fell into the "other" category suggesting that there are now wider issues impacting firm culture which may not fall within the traditional categories associated with non-financial misconduct. Some examples provided were intoxication or misuse of alcohol within the workplace resulting in poor conduct and other inappropriate comments or behaviour; inappropriate or offensive language or communication style within the firm or towards third parties (both verbally and in electronic communications); and employees engaging in retaliatory behaviour in relation to allegations made against them. It was further reported that in all sectors, action taken following non-financial misconduct rarely resulted in remuneration adjustment and when it was adjusted it was mostly against unvested variable pay. 

The FCA naturally observed some differences between sectors and firm sizes and where incidents were identified these were via grievance or similar formal processes and reported routes such as whistleblowing and firm led detection methods such as market surveillance. It was noted that for many instances there were multiple routes of detection for a particular case, often with an overlap between firm led detection methods and employee grievances. However, the FCA did report that some relevant policies, such as whistleblowing and disciplinary policies, were not in place at some firms surveyed. The commentary from the FCA is that having robust policies was important to improving detection. 

The FCA have been clear that they remain focused on the improvement of culture within regulated firms, which includes ensuring a firm's ability to properly assess fitness and propriety of both its senior managers and other certified employees. In light of this survey the regulator suggests that they now expect firms to reflect on whether their own processes, procedures and controls are robust enough to detect and address instances of non-financial misconduct and promote good working culture. 

Establishing and updating procedures to nurture existing good working culture and/or address incidents of potential non-financial conduct can be multifaceted. Whilst senior management and those at board level will already be aware of their existing regulatory responsibilities and reporting requirements, this serves as another attempt by the FCA to "drive continued momentum" so that discussions about non-financial misconduct and firm culture are prioritised.

The findings of this survey are not likely to be a surprise to many financial services employers. However, we anticipate the findings will likely form the basis for the emphasis of the FCA's upcoming guidance on this topic later this Autumn.