The Financial Conduct Authority is implementing new regulations that will expand its oversight of non-financial misconduct beyond the banking sector to include hedge funds, insurers, pension funds, investment managers, and brokers. The rules take effect in September and will apply to firms operating under the FCA’s senior managers and certification regime, which holds senior leadership accountable for regulatory violations.
Under the expanded framework, regulated companies must report serious incidents of non-financial misconduct to the regulator, including cases of bullying, harassment, racism, sexual violence, and intimidation. Additionally, firms will be required to disclose reports of employee misconduct to prospective employers of individuals accused of wrongdoing. Regulators view this approach as a mechanism to prevent “rolling bad apples” situations, where problematic employees move between firms without facing professional consequences.
City firms are actively preparing for the new regime by updating internal policies, refreshing staff training, and accelerating internal investigations before the September deadline. Industry experts indicate that companies are treating the transition seriously, recognizing that the FCA may pursue high-profile enforcement actions to demonstrate commitment to the new standards.
The regulatory expansion follows several high-profile misconduct cases that have reinforced the case for stricter oversight. Recent developments include Lloyd’s of London’s disclosure regarding its former chief executive and investigations into misconduct allegations at hedge funds. The FCA’s legal victories in enforcement actions, including a successful appeal upholding a ban on former Barclays chief executive Jes Staley, have demonstrated the regulator’s determination to pursue senior executives.
FCA officials stated that while the new rules aim to create consistency across the industry, primary responsibility for preventing and addressing misconduct remains with individual firms. The regulator indicated that unchallenged harassment and bullying raise questions about firm culture and damage confidence in the financial services sector overall.
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