FCA spotlight on non-financial misconduct

24 January 2020

The letter is directed towards wholesale general insurance firms but is something that all Financial Services firms should be aware of. There is mention of discrimination, harassment, victimisation and bullying – all extremely important and perturbing issues.

Poor culture is identified as a key root cause of major conduct failings.

These recent themes of misbehaviour pose a threat to integrity, diversity and inclusion that the sector is driving towards.

Non-financial misconduct can not only lead to unfavourable outcomes for customers but also for stakeholders and staff alike. It highlights the need for healthy cultures where staff feel like they can speak up without fear of retribution and where firms create healthy drivers in relation to remuneration, leadership, training, diversity and inclusion.

Meeting the FCA’s expectations

There is little doubt from the FCA that non-financial misconduct, or having a culture that permits non-financial misconduct, will have serious consequences.

The introduction of the Senior Manager & Certification Regime (SM&CR) sees senior managers take responsibility and personal accountability for the actions taken within their areas. Having a clear purpose and direction is linked to the achievement of the right conduct.

Organisations need to proactively identify key drivers of behaviour and ensure that they are leading to the desired outcomes. It is more than simply keeping policies and procedures up-to-date and is more around how a firm is governed, the way employees and customers are treated and, what the consequences are for conduct.

FCA’s 4 key drivers of culture

Any risk of non-financial misconduct must be identified and addressed.

How can we help?

• SM&CR post-implementation review, advice and conduct rules training; specifically around the fitness and propriety assessment and what constitutes reasonable steps to address non-financial misconduct;
• Incentivisation, remuneration or bonus structure review to identify weaknesses that relate to non-financial misconduct;
• Review of or assistance with development of your whistleblowing process;
• Independent governance reviews; and
• Culture assessment and benchmarking ensuring you have a purpose and strategy that is consistent with your business practice, people management and formal governance, systems and controls.

To find out more and discuss how Mazars could help you, please get in touch.

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