Culture and governance: financial services

In 2021 we predict

1st finding against a Senior Manager for a lack of Integrity under COCON 1.

The picture in 2020

• Increased employee engagement, expectation and challenge on issues relating to Culture and D&I.
• Increased focus from the FCA on non-financial misconduct and firms’ assessment of this in their conduct staff population.
• An uptick in market monitoring enquiries relating to market disclosures and inside information.
• A shift towards Business Purpose being a priority among the 4 pillars against which the FCA examines a firm’s culture - see quote below.

Statistics

• FCA response to a FOIA request dated 10 March 2020 (FOI 7094) indicates that 163 allegations relating to the culture of an organisation were made by whistleblowers in 2018 compared to 221 such allegations in 2019.
• The FCA banned 3 individuals from working in the financial services industry for non-financial misconduct.
• 45% of the FCA’s Senior Leadership Team identify as female; 10% of the SLT identify as BAME source: [FCA Diversity Annual Report 19/20].
• In the UK’s top 100 companies, more CEOs are called Stephen than are women [source: Chartered Institute of Personnel and Development (CIPD) August 2019].
• In 2018 there were only 12 Black portfolio managers in the entire investment management industry source: [New Financial Study 2018].

"Purpose is no longer a veneer on the culture of firms, it is the grain that is running through it in many firms.  Purpose has provided firms with a compass to navigate the unchartered waters of this crisis." Jonathan Davidson, Executive Directors of Supervision, November 2020.

Looking ahead to 2021

• We predict 2-3 Enforcement Final Notices relating to an individual’s integrity and/or fitness & propriety - but see the quote below.
• An increase in the number of Section 166 Skilled Person Reviews with a primary or secondary focus on a firm’s culture and governance.
• A rise in employee complaints and whistleblows arising from changing awareness and behaviours during the pandemic, including harassment/bullying, D&I, use of social media and WhatsApp, handling of confidential information in lockdown.
• An increase in scrutiny from the FCA/PRA regarding diversity in the senior leadership teams of regulated firms.

"Regulators will do well to recognise that it is all too easy to be dogmatic without knowing it; popular outcry is not proof that a particular set of events gives rise to any matter falling within a regulator's remit." High Court Judgment in Beckwith v Solicitors Regulation Authority November 2020.