The FCA has published key findings of its culture and non-financial misconduct survey.

The FCA has published key findings of its culture and non-financial misconduct survey, which examined how firms detect and handle non-financial misconduct incidents.

In February 2024, the FCA sent a survey to 1,028 regulated wholesale financial services firms asking about recorded incidents of non-financial misconduct in 2021, 2022 and 2023.

This was the first comprehensive non-financial misconduct data gathering exercise across these sectors and a significant step in understanding this subject matter, providing a baseline assessment of behaviours. 

The FCA use the term ‘incident’ to describe an alleged or confirmed occurrence of non-financial misconduct reported to or identified by the firm, including those not already reported to the FCA or that did not meet the FCA reporting threshold.

1. Executive summary

From the survey responses, the FCA found the following.

• The number of reported non-financial misconduct incidents increased over the 3 years surveyed.
• The distribution of non-financial misconduct types varied by sector, although bullying and harassment (26%) and discrimination (23%) were the most reported types of non-financial misconduct across all sectors. 41% of non-financial misconduct incidents were reported in the ‘other’ category.
• Firms identified incidents through reactive routes such as grievances or similar formal processes (50%) and through alternative reporting routes such as whistleblowing. Firms also identified incidents through firm-led detection methods such as market surveillance. In the survey, firms could report multiple detection methods for 1 incident.
• Disciplinary or ‘other’ actions were taken in 43% of cases. In the remainder, the FCA saw a range of other outcomes – either the cases were not investigated or unable to conclude, not upheld, upheld with no other action, or investigations were ongoing.
• Some types of reported non-financial misconduct, such as violence and intimidation, more often resulted in disciplinary actions compared to other types, such as discrimination.
• The total number of confidentiality and settlement agreements signed by complainants fell over the 3 years surveyed according to the data from the wholesale banks sector. The data from other sectors showed no clear trend.  
• Discrimination, with an average of 23% of cases across all sectors, had the highest percentage of incidents resulting in the complainant signing either a settlement or confidentiality agreement.
• In all sectors, action following non-financial misconduct rarely resulted in remuneration adjustment. When remuneration was adjusted it was mostly against unvested variable pay.
• Some relevant policies, like whistleblowing and disciplinary policies, were not in place at all firms surveyed.
• The FCA observed some differences between sectors and between firm sizes.

Analysing the data requires an understanding of the context of individual firms, sectors and changing societal expectations. The FCA are sharing its findings and analysis to:

• Allow boards at financial firms to understand the position at their firm relative to others
• Enable trade associations to coordinate continued industry action
• Inform the public and other stakeholders

The FCA thinks that this collective process will help to drive continued positive momentum on improving culture in financial firms. However, the FCA will not be making new best practice recommendations for firms at this time.

The FCA expects firms, working with their trade associations, to use this benchmark survey data to reflect on whether their own processes, procedures, and controls provide robust detection and appropriate outcomes. The FCA then wants firms to discuss non-financial misconduct at senior management and board levels.

All firms must fully comply with their existing regulatory responsibilities and reporting requirements. The FCA will use the survey responses to inform its supervisory and policy work and act where firms fail to adhere to its rules.

All survey findings require context and interpretation to understand. Therefore, care must be taken in making assessments based solely on the results that the FCA presents.

• https://www.fca.org.uk/data/culture-non-financial-misconduct-survey-findings#lf-chapter-id-about-the-data

There may be various commercial reasons why firms use confidentiality agreements or confidentiality clauses within settlement agreements.  

• https://www.fca.org.uk/data/culture-non-financial-misconduct-survey-findings#agreements

Confidentiality agreements cannot, however, be used to prevent public interest disclosures to the FCA. 

What the FCA expect from firms

Following this publication, the FCA expect firms to reflect on the data and consider how their own performance compares with their peers.

The FCA want firms to discuss non-financial misconduct at senior management and board level and consider whether they need to take steps to improve:

• Their culture
• How they identify and manage risks
• How they address non-financial misconduct on an ongoing basis

This also encourages sharing of good practice across firms, for example through trade association forums.

Firms should:

• Enable employees to speak up about non-financial misconduct
• Establish ways for employees to raise concerns, including formal processes for whistleblowing where these are not already in place

The FCA are aware an individual firm’s approach will vary according to its size and the nature of its operations. However, the FCA expect firms to:

• Take allegations of non-financial misconduct seriously
• Have effective systems in place to identify, investigate and remedy promptly and fairly when allegations are substantiated
• Be fully compliant with their regulatory responsibilities and reporting requirements, regardless of size or sector 

Source

https://www.fca.org.uk/data/culture-non-financial-misconduct-survey-findings#lf-chapter-id-what-the FCA-found