Regulated firms need to manage culture as FCA bars sex offenders from industry

The Financial Conduct Authority (FCA) has for the first time prohibited three individuals from working in the financial services industry following convictions of sexual offences (committed separately). The Regulatory Decisions Committee (RDC) concluded that, as a consequence, they are not fit and proper, and lack “the necessary integrity and reputation to work in the regulated financial services sector”. It determined that the actions of these individuals posed a severe risk to consumers and confidence in the financial system. These decisions are clear examples of the FCA’s requirement for high standards of behaviour extending beyond conduct in relation to financial services.

Each individual had been convicted of serious non-financial indictable offences while approved persons working in the financial services industry, and sentences of between nine months to seven years’ imprisonment have been levied. All three have been required to sign the sex offenders register.

Back in 2018, Megan Butler (Executive Director of Supervision – Investment, Wholesale and Specialists Division) had indicated to Parliament’s Women and Equalities Committee that the FCA considered sexual harassment to constitute misconduct: “[a] culture where sexual harassment is tolerated is not one which would encourage people to speak up and be heard, or to challenge decisions. Tolerance of this sort of misconduct would be a clear example of a driver of poor culture. It would be an obstacle to creating an environment where the best talent is retained, the best business choices are made and the best risk decisions are taken.”

In a post #MeToo world, financial institutions and senior managers will want to think carefully about managing conduct risks: through comprehensive training, whistle-blowing policies and review processes, to ensure that the firm and its staff and affiliates understand, and meet, the standards required both inside and outside the office.