All financial services providers will need to take more care to protect staff against sexual harassment, as the FCA acts to clean up the sector’s image
A 220% rise in complaints around sexual harassment has led to the Financial Conduct Authority (FCA) promising to toughen up the rules on protecting staff in the financial services sector.
Megan Butler, executive director supervision – investment, wholesale and specialists’ division, at the FCA, wrote to the government’s Women and Equalities Committee, saying that the “FCA views sexual harassment as misconduct, which falls within the scope of our regulatory framework”.
She suggested: “Culture in financial services is widely accepted as a key root cause of the major conduct failings that have occurred within the industry in recent history, and we expect firms to foster healthy cultures [that] support the spirit of regulation in preventing harm to consumers and markets.”
Ms Butler warned: “It would be an obstacle to creating an environment where the best talent is retained, the best business choices are made and the best risk decisions are taken.”
Going forward, through supervision of firms, the FCA wants firms to “ensure that they understand the importance of fostering a healthy culture”, adding: “We do not only look at issues and their root causes when things go wrong but [we also] consider how a firm’s culture is shaped by drivers such as incentives and remuneration, training, leadership, governance arrangements, purpose, and diversity and inclusion.”
Culture in financial services is widely accepted as a key root cause of the major conduct failings that have occurred within the industry in recent history
Ms Butler told the government that the FCA will use its senior managers and certification regime to improve conduct among staff at all levels. It will apply to all firms authorised under the Financial Services and Markets Act 2000, from December 2019.
“The regime ensures that senior executives are directly accountable for functions [that] fall under their responsibility,” she explained. “We assess their competence, honesty, integrity and reputation to ensure that they are ‘fit and proper’ to do so. This means we will, for example, consider if an individual has had a criminal conviction, sanctions for discrimination, harassment or sexual misconduct.”
Her words were echoed by Jon Fisher, a partner at Pinsent Masons, who warned: “Financial services firms have a commercial need to eliminate harassment from the workplace, in addition to the regulatory and legal imperatives.
“They will not be able to attract and retain top female talent unless they do so. Increasingly, they will also find that their clients will not do business with them if they have failed to implement the right culture,” he said.
“This is not just a case of having a harassment policy, which sits gathering dust on a shelf. Firms need to embed fairness and respect within their culture and tackle any harassment quickly and effectively. This requires full and public support from the most senior people in the organisation,” Mr Fisher added.
All this comes as Lloyd’s announced people working in the Lloyd’s insurance market face potential lifetime expulsion if they are found to be responsible for sexual harassment.
The bastion of the insurance market has been making the headlines for all the wrong reasons of late, as allegations of sexual harassment have emerged, most notably in an article published by Bloomberg.
Now, the corporation has developed a plan in collaboration with and endorsed by the Lloyd’s board and council, and by the associations representing the Lloyd’s market – the Lloyd’s Market Association and the London & International Insurance Brokers Association – to combat the problem.
Lloyd’s said: “This wide-ranging set of actions is intended to increase reporting, impose strong sanctions on those found to be responsible for inappropriate behaviour, and create better understanding and awareness
of the issues.”
- Provision of an independently managed, confidential and market-wide access point for reporting inappropriate behaviour. In April, Lloyd’s launched its bullying and harassment support line, available 24/7 and 365 days per year to everyone who works in the Lloyd’s market.
- Confirmation that, where investigations conclude that individuals have a case to answer, they will be subject to sanctions from their own companies and also from Lloyd’s.
- A comprehensive review of policies and practices across the Lloyd’s market, with a view to identifying and sharing best practice.
- Provision of training focused on prevention, as well as reporting, and supporting those who have been subjected to inappropriate behaviour.
- Changes to the Lloyd’s Nominations Committee to increase diversity.
Lloyd’s CEO John Neal said: ‘It has been distressing to hear about the experiences of women in the Lloyd’s market. No one should be subjected to this sort of behaviour and, if it does happen, everyone has the right to be heard and for those responsible to be held to account.
“I am pleased the market has given its full support for a strong set of actions and I am determined that Lloyd’s offers a safe and inclusive working environment for everyone.”
Lloyd’s has also updated its rules of access, which state that anyone entering Lloyd’s premises under the influence of drink or illegal drugs will have their passes confiscated, after revealing that about half of harassment cases involve alcohol.