Non-financial misconduct in financial services firms has once again been brought to the forefront following the concurrent release of the Financial Conduct Authority’s (FCA) Consultation Paper 20/23, titled “Diversity and inclusion in the financial sector – working together to drive change“, and the Prudential Regulation Authority’s (PRA) Consultation Paper 18/23, titled “Diversity and inclusion in PRA-regulated firms“.
Addressing non-financial misconduct is an essential aspect of maintaining trust in financial services. It remains a significant risk for firms and can lead to a variety of severe outcomes, including regulatory penalties, reputational damage, and a drop in investor confidence. The recent FCA’s proposals are a clear indication that firms must take effective measures to curb all forms of misconduct, separate from traditional misconduct related to financial services.
Implementation of the proposed guidelines could result in considerable modifications to the governance structures and human resource practices of many financial services firms. Also, the FCA’s renewed focus could lead to enhanced scrutiny of companies’ conduct and culture, particularly concerning diversity and inclusion.
Firms should begin to prepare for these proposals by reviewing operational and HR processes and ensuring that all relevant personnel have a thorough understanding of the FCA’s approach to non-financial misconduct. Firms can also consider conducting a comprehensive review of their diversity and inclusion policies, practices, and training to ensure they are in line with the proposals.
Should you require more information on this matter, the full guidance can be reviewed on the JD Supra website, courtesy of Bryan Cave Leighton Paisner.
By adhering to the proposed guidelines, firms can effectively respond to the mounting concerns over non-financial misconduct and thereby preserve the confidence of their stakeholders. With the FCA signalling a heightened focus on these areas, the potential for penalties for non-compliance is substantial, further emphasizing the importance of addressing this issue at the earliest.