UK watchdog to go after bullying and discrimination beyond banks

By Nell Mackenzie and Tommy Reggiori Wilkes

LONDON, July 2 (Reuters) - Britain's Financial Conduct Authority is to extend rules covering non-financial misconduct such as bullying and discrimination beyond the banking industry in a bid to clamp down on bad behaviour, it said on Wednesday.

Concerns about poor practices at financial firms have shot up the regulatory agenda in recent years, with the FCA under pressure to explain what it will do.

After its first comprehensive study into the scale of the problem, the regulator found last year that reports of bullying, discrimination and other non-financial misconduct in Britain's finance industry had surged almost 60% over three years to 2023.

"Behaviour like bullying or harassment going unchallenged is one of the reddest flags – a culture where this occurs can raise questions about a firm's decision-making and risk management," said Sarah Pritchard, the FCA's deputy CEO.

She said the rules for non-financial misconduct would increase consistency across the industry and deepen trust in financial services.

The UK watchdog will also oversee how finance firms handle "serious, substantiated cases of poor personal behaviour".

Relevant information on the cases must be shared in the same way financial misconduct currently is, which the FCA said would make it harder for individuals to avoid consequences by moving from firm to firm.

From September 1, 2026, around 37,000 other regulated firms, such as hedge funds, asset managers, and consumer credit firms - most of them small, with under 49 employees - will be subject to the proposed rules for non-financial misconduct.

The final rules are subject to consultation.

Last year's FCA survey found that more than one third of firms did not report such cases to their boards, and that many lacked appropriate governance structures to deal with such incidents.

"Toxic cultures like bullying, harassment and discrimination often correlate with risky financial behaviour, and high-profile cases have damaged reputations, investor confidence which often result in big losses," said Anu Chhabra, founder of the Women in Finance Group.

In one of the highest-profile cases, the FCA in March fined Crispin Odey, founder of the now defunct hedge fund Odey Asset Management, and banned him from the finance industry for a lack of integrity.

Odey, who denied the allegations, was ousted from his fund in 2023 after the Financial Times and Tortoise Media jointly reported allegations of sexual misconduct against him. Odey did not respond to a request for comment.

WON'T SHIFT THE DIAL

Some lawyers said the FCA's new set of rules was not as fundamental a shift as some had expected, with the regulator stopping short of making them a "threshold condition", under which firms must meet minimum requirements to stay FCA-authorised.

"The FCA has sought to clear up the mess that is the current drafting of the conduct rules," said Lorraine Johnston, a partner at law firm Ashurst.

"However the technical clarifications around scope and alignment of bank and non-bank firms – whilst a delight for lawyers – may not necessarily shift significant dials for firms, except in the most contentious of cases."

Breaches of the proposed rules include bullying, harassment or violence.

Firms will also have to notify the regulator if an employee is given a written warning, is dismissed, or sees a change in remuneration as a result of their behaviour, the FCA said.

Companies will also need to tell the regulator about a prospective employee's private life where it may void their 'fit and proper' status to work in finance, including social media posts, a criminal conviction, or information that comes to light during court proceedings.