YOUR COMPLIANCE MATTERS – FCA Consultation Diversity and inclusion (D&I) in the financial sector  

YOUR COMPLIANCE MATTERS – FCA Consultation Diversity and inclusion (D&I) in the financial sector

Relevance:                   All Firms.

Action required:         Consider any issues you may have with the concerns raised by the FCA. New Rules will be in place in 2025.

The FCA has published a Consultation CP23/20: Diversity and inclusion in the financial sector – working together to drive change (fca.org.uk). The Consultation period runs to 18/12/2023. There will be a Policy Statement some time in 2024 (followed by a 12-month implementation period).

The FCA has stated that ‘The degree to which firms reflect the societies they serve and how open a culture they create is central to each of the objectives set for us by Parliament: to protect consumers, enhance market integrity, support competition in financial services and facilitate UK competitiveness and economic growth.

That is why, together with the Prudential Regulation Authority (PRA), we have been clear that diversity and inclusion are regulatory concerns. Yet, the evidence suggests the financial services sector is not yet where we should be.

We are clarifying and strengthening our expectations around non-financial misconduct, which will apply to firms large and small, across the financial services sector’.

In this consultation, the FCA sets out proposals to better integrate non-financial misconduct (NFM) considerations into staff fitness and propriety assessments, Conduct Rules, and the suitability criteria for firms to operate in the financial sector (Threshold Conditions).

In practice this would mean the FCA:

-      Would expect that staff are held to high levels of fitness and propriety (and any evidence of workplace bullying or discrimination need to be taken in to account).

-      Will expand the Conduct Rules to make clear that workplace bullying, harassment and similar behaviours are to be considered as misconduct.

-      Would consider evidence of discrimination as impacting the suitability of the firm to be authorised by them.

They are also proposing all firms to report their average number of employees on an annual basis (firms already do this via the 6 monthly RMAR).

Larger, FCA authorised firms (those with 251 or more employees calculated on a solo entity, rather than group basis) will need to:

• collect, report, and disclose certain D&I data

• establish, implement, and maintain a D&I strategy

• determine and set appropriate diversity targets

• recognise a lack of D&I as a non-financial risk’

Action Required

We hope that the proposals will not cause any great concern, but you need to consider any current cultural issues within your business. As always, we are happy to discuss.