In financial services, the focus has historically been on numbers: managing risks, balancing books and ensuring compliance. But a recent Financial Conduct Authority (FCA) survey has highlighted a different priority for the industry: tackling non-financial misconduct — conduct not directly involving finances that negatively effects workplace culture, employee well-being and firm reputation. 

In its survey of more than 1,000 regulated investment banks, brokers and wholesale insurance companies in the United Kingdom, the FCA uncovered that non-financial misconduct incidents rose by nearly 60% from 2021 to 2023. Yet, 38% of firms didn’t report these cases to their boards, and a third lacked formal governance structures or committees that decide the outcomes and disciplinary actions for those involved in misconduct cases.  

The findings signal a need for more proactive oversight and accountability of Britain’s financial industry, including a prevention strategy that includes greater education and awareness.  

What is non-financial misconduct? 

The term “non-financial misconduct” encompasses behaviors that include bullying, harassment and discrimination, misuse of expenses, substance abuse, and security breaches. Though not financially motivated, these actions can create a toxic work environment that adversely impacts culture and erodes employee and client trust. 

Sarah Pritchard, FCA executive director, says: “Allowing non-financial misconduct to persist undermines trust and confidence, leading to an environment where wrongdoing can go unchallenged.” 

According to the FCA, “a corporate culture that tolerates sexual harassment or other non-financial misconduct is unlikely to be one in which people feel able to speak up and challenge decisions and raises questions about a firm’s decision making and risk management.” 

FCA call to action: Foster a healthier culture 

The FCA survey data enables firms to benchmark themselves against their peers, while also reflecting on their own processes, procedures and controls to identify and manage non-financial misconduct.  

Should allegations or evidence of non-financial misconduct come to light, the FCA expects regulated firms to: 

  • Take allegations of non-financial misconduct seriously 
  • Have effective systems in place to identify, investigate and remedy promptly and fairly when allegations are substantiated 
  • Be fully compliant with their regulatory responsibilities and reporting requirements, regardless of size or sector  

The FCA is expected to publish a policy framework by the end of year establishing minimum standards for firms. It’s expected that employee training and establishing ways for employees to raise concerns, including formal processes for whistleblowing, will be part of the framework’s proactive strategies and best practices. Financial institutions will likely have around 12 months to implement the necessary changes.  

Steps to create a culture of accountability 

Now is the time for financial services firms to build a culture that values integrity, accountability and respect. To effectively combat non-financial misconduct, firms should ensure that all employees, managers, executives and board members understand their roles in fostering a respectful workplace and are equipped to address any issues that arise. Steps should include: 

Invest in training: With regular training covering misconduct scenarios and using real-life examples, financial services firms can meet regulatory expectations and improve workplace culture, foster an environment where everyone feels safe to voice their concerns and drive business success.  

Create clear reporting channels: Ensure your employees understand how and where to report misconduct, including anonymous options. Proper training ensures that employees know how to report misconduct and understand the investigation process to reduce the fear of retaliation, which can be a significant barrier to reporting. 

Regularly review policies: As workplace dynamics evolve, keep policies up to date with current regulatory standards, industry best practices, and compliance requirements. Frequent reviews allow organizations to identify and address potential gaps in policies that could enable misconduct. 

Open culture: Encourage leaders to model and promote accountability. Foster a speak up environment where employees feel safe reporting misconduct without fear of retaliation. This signals to employees that the organization values ethical behavior and respects everyone’s voice.  

    Get Access to a Full Course