FCA publishes consultation paper on diversity & inclusion in the financial sector

Expansion of the scope of COCON to cover serious instances of bullying, harassment and similar behaviour toward fellow employees and employees of group companies and contractors.

The FCA proposes to add guidance on the types of behaviour that may breach the conduct rules, as well as conduct that is “out of scope” where it relates solely to an employee’s personal or private life. The FCA also refers to an exception where the misconduct “clearly relates to a part of the firm’s business that does not carry on any financial services activities”. Disciplinary action will only be taken for “serious” breaches, or multiple instances that are collectively “particularly serious”.

Provision of a more detailed explanation of how non-financial misconduct forms part of the Fit and Proper test for employees and senior personnel.

It’s proposed that bullying, sexual or racially motivated offences and similar misconduct within the workplace would be relevant to fitness and propriety and similarly serious behaviour in a person’s personal or private life would also be relevant. If an individual is not Fit and Proper, the FCA may withdraw approval and/or impose a partial or full prohibition, depending on the level and type of risk posed by the individual in question. Conduct that could damage public confidence in the UK financial system is also likely to mean that the person is not Fit and Proper.

Extension of the suitability guidance on COND, to include offences relating to a person or group’s demographic characteristics (such as sexual or racially motivated offences) and tribunal or court findings that the firm, or someone connected with the firm, has engaged in discriminatory practice as relevant.

The FCA also proposes to require certain firms to:

• Report their average number of employees to the FCA on an annual basis.
• 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.

Except for employee numbers, the proposed data reporting requirements would only apply to large firms, defined as those with over 250 employees, and for CRR and Solvency II firms of any size.