Non-financial misconduct is misconduct
Following its consultation and proposals, the FCA recently issued a statutory information requirement to all wholesale banks, insurers and insurance intermediaries, requiring detailed information concerning their incidents of non-financial misconduct by staff going back three years.
In doing so, the FCA referred to its publicly expressed view that non-financial misconduct is misconduct, and not an additional principle.
It noted that non-financial misconduct includes individuals’ conduct for issues such as (but not limited to) bullying, sexual harassment and discrimination, whether in or outside the workplace.
The data requested is to include incidents that took place at the office, working from home, working offsite and social situations related to work.
This can include incidents that happened in any work-related capacity or event and may include events that have been organised through work, including staff social events, off-site training and conferences, as well as client entertainment or sponsored events.
It would not include private events organised by members of staff among themselves with no other connection to work.
The questions asked by the FCA include whether firms have used confidentiality agreements or confidentiality clauses within settlement agreements, requiring individuals not to disclose allegations they have raised concerning non-financial misconduct.
The survey does not seek detailed information related to the specifics of allegations or investigations conducted. However, although the FCA notes that not all allegations will be substantiated, it requires the data to include complaints that were ultimately not upheld.
The questions about the use of NDAs follow evidence given by the FCA to the "Sexism in the City" inquiry, where the chair of the committee asked the FCA how its consultation proposals would “root out the bad apples once and for all”.
The committee said it had seen “compelling evidence that everybody knows who these people are, but nobody actually reports them, because it is not practical for the victims and, if they are reported via HR or within companies, they are protected".
The committee referred to hearing “that NDAs are used as a very effective tool to allow perpetrators to remain in post, while the victims move on”.
In response, the FCA commented that if its data surveys showed use of NDAs alongside non-financial misconduct, that information could be taken into account in its future supervisory work.
The "Sexism in the City" report goes further in calling for a legislative ban on the use of NDAs in harassment cases.
In the meantime, it recommends that the FCA collect data on the use of NDAs by regulated firms in cases of non-financial misconduct.
In a similar vein, a report by the Legal Services Board on the use of NDAs, published in February 2024, found that “some respondents… reported on the impact of NDAs on fair workplaces, with one respondent noting that NDAs can enable individual employers to engage in repeated acts of discrimination without public exposure”.
