Josh Ballard

In recent years, regulators have increased their focus on non-financial misconduct. It’s time that firms made a concerted effort to evolve their compliance function accordingly.

The role of a Chief Compliance Officer is to ensure that their firm is complying with regulatory requirements and that the company and its employees are complying with internal policies and procedures. Unfortunately, in most cases, these requirements, policies and procedures relate solely to financial misconduct. 

So, what about instances of non-financial misconduct? The Behavox Enterprise Conduct and Risk Report revealed that since moving to remote working, employees are being subjected to increased levels of workplace misconduct.

But who is responsible for identifying discrimination, bullying or harassment in the workplace? Is it down to the compliance team to use the tools at their disposal or does HR have a responsibility to root out this kind of behavior?

The FCA’s Stance on Non-Financial Misconduct

Whatever approach a firm elects to take, the Financial Conduct Authority (FCA) has made it clear that it is no longer good enough to neglect non-financial misconduct. 

Back in December 2018, Chris Woolard, then interim FCA CEO said: “…over the last 12 months, we have seen a noticeable upturn in reports which concern issues like discrimination and sexual harassment in financial services. Our message to firms is clear: non-financial misconduct is misconduct, plain and simple.”

“Our message to firms is clear: non-financial misconduct is misconduct, plain and simple.”

chris woolard, former interim fca ceo

True to their word, in November 2020, the FCA barred three individuals from financial services following respective convictions relating to sexual assault, voyeurism and the making, possession and distribution of indecent images of children.

Commenting on the action, Mark Steward, FCA executive director of enforcement and market oversight, said, “The FCA expects high standards of character, probity and fitness and properness from those who operate in the financial services industry and will take action to ensure these standards are maintained.”

Firms Must Ensure Certified Staff are ‘Fit and Proper’

While these three cases relate to convictions unrelated to the workplace, firms have a responsibility to ensure that their staff meet the required standards.

Section SYSC 24.2 of the FCA Handbook states that firms must identify the senior manager responsible for ensuring that the firm takes appropriate steps in assessing whether their certified staff are fit and proper. 

A proactive approach would be to use a tool such as Behavox Conduct that identifies instances of non-financial misconduct via the surveillance of communication data. Compliance and HR teams receive alerts when suspect content is found and they’re then able to take the appropriate action at the earliest opportunity.

The Effect on Compliance Culture and the Workplace

While it is every firm’s obligation to provide a environment free of discrimination, bullying and harassment, being able to identify and prevent non-financial misconduct should also be seen as an opportunity to create a workplace that attracts and retains the best talent while cultivating a more effective culture of compliance.

In January 2020, FCA executive director of supervision, retail and authorisations, Jonathan Davidson said, “We view both lack of diversity and inclusion, and non-financial misconduct as obstacles to creating an environment in which it is safe to speak up, the best talent is retained, the best business choices are made, and the best risk decisions are taken.”

Elevating non-financial misconduct to the same severity as financial misconduct may be a new way of thinking for many chief compliance officers but, in the eyes of the regulator, it is now an essential requirement.