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The UK Parliament's Treasury Committee has recently conducted an investigation into the subject of women in financial services with the aim of looking into barriers to women, gender pay gaps, diversity, sexism, sexual harassment and misogyny, and the role that government and the financial services regulators should have in relation to the many complex and thorny issues that can arise in this area. A Call for Evidence closed earlier this month and a joint publication from the FCA and the PRA is expected at any time.

This is not the first investigative initiative of its kind: there was an earlier iteration in 2018, which resulted in various recommendations being made, and there is also the Treasury's "Women in Finance Charter". Progress that has been made over the intervening five years in implementing recommendations made to address the concerns of these earlier initiatives will be assessed and will assist the determination of whether more needs to be done to eradicate legacy male dominated cultures where women can be paid less and subject to stigmas, for example, for having children or for requesting flexible working arrangements, and perhaps more seriously, be left feeling unable to speak out or otherwise vulnerable.

You might be forgiven for thinking that non-work related misconduct is a topic for A-listers, film stars and limelight seekers, and say "well, what does my non-financial services conduct have to do with my financial services conduct?", "why should what I do outside of hours or outside the office affect my role in financial services?", and you might also ask "why would this have anything at all to do with the FCA?". In answer to your questions, it is not an overreach of the regulator's remit to consider these issues. The FCA expects high standards of character, honesty, probity, and fitness and propriety, from those persons who operate within the financial services industry and it has long been the case that matters outside the workplace could be relevant to the regulator’s assessment of those factors.

It is not that difficult to see that non-financial services misconduct is potentially relevant to matters of integrity and reputation and that there is an interface between the private and the professional. These issues can, in turn, be matters that are highly relevant to culture. The FCA is concerned about healthy culture and will look to see it embedded in financial services businesses, driven down through the business right from the top. Culture really matters in financial services because it can affect the markets and consumers. The FCA will look for cultures where diversity is fostered, where talent is retained, where there is healthy challenge and where it is safe to speak out. These are the cultures in which the best decisions are taken. Consequently, factors that are counter-productive to positive culture, in a financial services business, will be a concern for the FCA.

The FCA is not the only regulator to look at these sorts of issues. The SRA, which regulates solicitors in the legal profession, has been known to consider how it can extend the reach of professional regulation into the personal lives of those who it regulates where appropriate and other professions have similarly themed cases foregrounding key duties like honesty and integrity.

The financial services industry has not been immune from the headlines on the topic this Summer with coverage of a series of allegations of misconduct. While the number of reports made to the FCA do not seem to be that high (it is said that there were three in 2020/2021 and ten in 2021/2022 and a total of 43 over the last five years) the fact that there are any at all is of concern.

There are cases where the FCA has used the Senior Managers and Certification Regime (SMCR) to hold individuals to account. The enforcement powers available to the FCA for anyone found in breach of the regulatory standards include fines or, in serious cases, a ban from their career in financial services. Unfortunately, however, serious damage can of course occur before a regulatory intervention is possible and it is clear that non-financial misconduct (or allegations of) can have serious repercussions not just for the individual(s) concerned, but also for the firm concerned, the financial services industry as a whole, and for wider society.

Following the news headlines of Summer the FCA made an announcement that it would investigate non-financial misconduct on the basis of its relevance to the fit and proper standards that are so relevant to the behaviour of individuals who wish to work in the financial services industry.

Driving a positive change to culture is going to be key. Businesses which have a significant concentration of power within a small group of people or even in one very dominant person, particularly owner-managed businesses, can be potentially problematic. Culture in financial services businesses, including non-financial conduct both inside and outside of the workplace, has long been a concern of the Treasury Committee. It is essential that financial services businesses have effective governance policies, procedures and controls. If one person, or a small group of people, can circumvent effective processes, then they can drive a poor culture down from the top and create an environment where misconduct is tolerated or accepted. As a result, those who are not in control might be afraid to speak out, or afraid of retribution, while those who control the business have the freedom to behave (or misbehave) outside of oversight functions.

We can expect that there will be an increased focus on this topic from government, from regulators and from the public. High profile cases can enable significant change. Poor conduct can be very damaging to workplace culture and lead to serious problems. It should be hoped that the investigations that are in train will ultimately lead to a financial services industry which is safe and inclusive, where women (and those from other underrepresented groups) can reach senior ranks, and that from those positions those people can accomplish positive cultural and organisational change.

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