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The UK’s top financial regulator is gearing up to grill banks, insurers and brokers on the level of sexual harassments and bullying complaints in their workplaces and whether they have used non-disclosure agreements to hush up grievances.
Sarah Pritchard, the Financial Conduct Authority’s executive director for markets and international, told MPs on Wednesday that the regulator was intensifying efforts to tackle non-financial misconduct across the City.
The issue has been in focus after a number of high-profile cases of sexual misconduct — including that of hedge fund founder Crispin Odey, who was ejected from the company he founded after an investigation by the Financial Times revealed multiple claims of sexual harassment and assault against him.
Appearing before the Treasury select committee’s “Sexism in the City” investigation, Pritchard said wholesale banks, wholesale insurers and brokers would be asked for data on the number of complaints of non-financial misconduct in their businesses, as well as “methods of detection and methods of resolution”.
A person familiar with the exercise said participation would not be optional. Pritchard said companies would be asked to provide the data in a “very short period of time” and added that the FCA hoped to complete its analysis on the data “by the summer”.
The regulator could not immediately say whether the results would be made public.
“One of the reasons that we’re going out with the piece of work . . . will be so that we can see how cases of non-financial misconduct are resolved,” Pritchard told the committee.
“If we see, for example, use of NDAs alongside non-financial misconduct coming through that data . . . we will be able to take that into account in our future supervisory work.”
Pritchard did not elaborate on how the FCA’s supervision division might deal with a firm that was persistently using NDAs but stressed that there were “a number of valid reasons why an entity might use a non-disclosure agreement to keep confidential the commercial terms of a settlement”.
Robert Dedman, a financial services partner with law firm CMS and former head of enforcement at the Bank of England, said the exercise marked “the first time that the FCA has tried to get an industry-wide sense of the level of non-financial misconduct in the industry”.
“The historic lack of regulatory guidance in this area meant firms had to make their own judgments about what constituted non-financial misconduct,” he added. “This may lead to inconsistency in the information the FCA receives from firms, which the regulator will need to be alive to when calibrating its supervisory response.”
The FCA published a consultation last September on how firms identified and dealt with non-financial misconduct, as part of a broader consultation on improving diversity after decades of industry-led efforts yielded scant progress.
The measures do not mandate companies to report their use of NDAs to the FCA.
“We recognise there has been feedback on this point in the consultation so we’re open to understanding whether those are refinements we can make to collect statistics,” said Nikhil Rathi, the regulator’s chief executive. He added that the FCA could see “there could be a case for looking at” collecting data around NDAs.
Pritchard stressed the proposals would give the regulator “much better visibility around non-financial misconduct regardless of whether an NDA is used. A NDA won’t prevent any notifications to the regulator.”
The proposals include clearer guidance on the FCA’s view that non-financial misconduct is “relevant to fitness and propriety” of individuals to hold roles in financial services and offering firms examples of the kind of issues it is concerned about.
