FCA to class sexual harassment as conduct breach in industry crackdown

Megan Butler, executive director of investment, wholesale and specialist supervision at the FCA, wrote to the Women and Equalities Committee to outline the regulator's view on individual accountability and assessing whether staff are ‘fit and proper’.

In the letter to Committee Chair Maria Miller, Butler revealed that there have been instances where the FCA has denied authorisation to individuals who were found not to be fit and proper on the basis of their ‘non-financial’ conduct.

She said the FCA will assess "competence, honesty, integrity and reputation" and this includes whether an individual has had a criminal conviction, sanctions for discrimination, harassment or sexual misconduct.

Additionally, firms are required to inform the FCA of potentially serious misconduct involving their employees, including criminal convictions and other sanctions, upheld complaints, and disciplinary proceedings.

Butler also stressed that as well as expecting firms to have appropriate internal whistleblowing and complaints processes in place, individuals can raise sexual harassment issues with the FCA directly, and that 'gagging orders' do not affect someone's ability to make disclosures.

She said the regulator would "be especially interested if firms were systemically mishandling allegations or incubating a culture of sexual harassment", noting the Public Interest Disclosure Act which protects whistleblowers from harm or dismissal.

Butler concluded by stating that how firms handle poor personal misconduct, including allegations of sexual misconduct, is a topic which the FCA is increasingly discussing with firms.

She said: "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 which support the spirit of regulation in preventing harm to consumers and markets.

"A culture where sexual harassment is tolerated is not one which would encourage people to speak up and be heard, or to challenge decisions. Tolerance of this sort of misconduct would be a clear example of a driver of poor culture."