FCA rules covering bullying and harassment extended to regulated financial firms

The new rules clarify that non-financial misconduct (NFM) can amount to a conduct rule breach for non-bank organisations and broadly mirrors the Equality Act 2010’s definition of harassment, but has also been widened to include violence.

The FCA said the rules will be extended from banks to an additional 37,000 other regulated firms, meaning “substantiated cases of poor personal behaviour will also need to be shared through regulatory references, in the same way financial misconduct currently is, making it harder for individuals to avoid consequences by moving from firm to firm”.

Dr Anne Sammon, an expert in employment law at Pinsent Masons, said: “The FCA has clarified that a breach of the new rule would amount to either a breach of Rule 1, covering integrity, or Rule 2, covering due skill, care and diligence.”

“The conduct must still be related to their regulated role within or associated with the workplace to give rise to a conduct rule breach. If the NFM takes place outside of work and therefore does not give rise to a conduct rule breach, it could still be relevant as to the firm’s assessment of fitness and propriety for senior regulated staff,” she said.

“This leaves a two-tiered system when a NFM outside of work is relevant for senior staff, insofar as it relates to their fitness and propriety, but not more junior staff.”

The rules do not apply to payments and e-money firms, regulated investment exchanges and credit ratings agencies.

A draft guidance has been published alongside the new rules with consultation open until 10 September, covering how firms should consider non-financial misconduct when assessing conduct rule breaches and whether an individual is fit and proper to work in financial services. The FCA said that it will not publish the guidance unless there is widespread support for it.

Chris Evans, an expert in employment law at Pinsent Masons, said: “The guidance includes information as to what is ‘at work’ and ‘not at work’.”

“The guidance does not necessarily mirror the law on vicarious liability and firms will have to navigate drawing a distinction between what is ‘at work’ from a civil liability perspective and what is ‘at work’ from a conduct rule perspective,” he said.

“There remains some uncertainty in the guidance as to what is a work event, such as when is an ‘after party’ a ‘continuation of a work event’ where COCON applies, which may result in difficult judgement calls with need to be made by firms.”

The FCA made clear that an absence of reported conduct rule breaches is not a clear indicator of a firm’s culture, according to Evans.

“A high number of reported breaches could signify a healthy speak up culture,” he said.

“There is no expectation to monitor private lives, but if a firm becomes aware of information it is expected to deal with it.”