Tougher diversity standards proposed for finance sector in misconduct crackdown
Larger companies will come under more scrutiny after a string of sexual assault allegations emerged at influential firms in the City.
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Your support makes all the difference.The UK’s financial sector could face tougher standards for diversity and inclusion in a bid to clamp down on workplace bullying and sexual harassment, under new proposals by financial regulators.
Larger companies will come under more scrutiny after a string of sexual assault allegations have emerged at influential firms in the City.
Proposed new measures aim to make it easier for staff members to speak out or challenge behaviour they see at their firm.
The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) set out the proposals for regulatory change as part of a 12-week consultation.
It comes after the Financial Times uncovered allegations of sexual harassment and misconduct against City financier Crispin Odey by 13 women who either worked with or had professional dealings with the fund manager.
It resulted in Mr Odey leaving the hedge fund he set up, Odey Asset Management, and raised questions about how the historic claims were handled by the regulator. Responding in June, Mr Odey denied the allegations.
Furthermore, influential business lobbying group the Confederation of British Industry (CBI) has battled for survival after more than a dozen women came forward with allegations that they were sexually harassed while working for the company. Two women said they were raped by colleagues.
The FCA said it wants to clarify its expectations around non-financial misconduct across the sector.
Chief executive Nikhil Rathi said: “We have taken a lead among regulators in taking a clear stance that non-financial misconduct, such as sexual harassment, is misconduct for regulatory purposes.
“We’re strengthening our expectations on how the firms we regulate consider such misconduct when deciding whether someone is fit and proper to work within the industry.”
Having a more diverse and inclusive workforce will help guard against “groupthink”, which allows companies to get away with making poor decisions, the watchdog argued.
Firms also need to foster inclusive and healthy workplace cultures in which staff from all backgrounds feel comfortable contributing, speaking up and challenging ingrained views and practices
Larger financial firms – those with more than 250 employees – could be required to set diversity targets, and collect and report data on certain characteristics such as disability and ethnicity at their company.
“Firms also need to foster inclusive and healthy workplace cultures in which staff from all backgrounds feel comfortable contributing, speaking up and challenging ingrained views and practices,” the FCA said in its report.
But the watchdog stressed that it is does not want to “prescribe” how firms should improve diversity and inclusion on an individual basis.
“We do not propose to set sector-wide targets and firms remain free to determine their own targets consistent with their needs,” it said.
For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, it's vital they attract, retain and promote the best talent. The data suggests this isn’t happening
In time, it could consider moving to mandatory reporting of all employee characteristics, such as socio-economic background, at a later date.
Mr Rathi added: “For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, it’s vital they attract, retain and promote the best talent.
“The data suggests this isn’t happening. Our proposals will encourage the largest firms to put in place plans and report against their delivery.”
The regulators plan to publish the final rules following the consultation in 2024.