SMCR+ View Flash Alert - Non-financial misconduct survey

You will have read in January’s SMCR+ View and also in the financial press that the FCA has planned to issue a non-financial misconduct (NFM) survey to firms. The FCA’s NFM letter and survey to wholesale insurers and insurance intermediaries has now landed.

We understand that a number of letters for wholesale banks and brokers will likely follow next week.

The FCA is compelling firms to respond by issuing a s.165 notice. Senior Managers should be very careful in ensuring responses are accurate and verified - we’ve recently seen the potential perils of getting this wrong with the Decision Notice against Mr. Staley… One positive before we get into the detail is that the FCA do focus on the fact that this is a supervisory effort to get baseline data and that they will be sensitive about not making inferences of poor culture just because one firm has no information to report and another has much more… let’s hope that this is a genuine remark.

Summary of key points:

1. NFM is partly defined in the letter as bullying, sexual harassment, and discrimination, but isn’t limited to these things, thus making it potentially hard for firms to scope what allegations/incidents need to be reported (unless this is made clearer in the underlying survey). All NFM allegations / incidents have to be reported to the FCA, not just those already reported via REP 008 forms etc so this goes much wider than existing reporting obligations.

2. Key questions (covering 2021, 2022, 2023) relate to how allegations of NFM were detected, what the allegations were and the outcomes, and what further outcomes were recorded (e.g. NDAs/Employment Tribunal). Statistics need to be split between SMFs and non-SMFs and also by incidents taking place in the office, WFH, working offsite and work socials.

3. There will be other questions on: regulatory references, governance and management information, appointed representatives, diversity and inclusion policies, remuneration, disciplinary and whistleblowing policies and procedures.

4. The FCA understand some of this data will require manual searches and might be unstructured so if firms have issues meeting the deadline / accessing the information let them know immediately.

If you’d like to discuss the approach to answering these questions and what should / should not be included then we’re very happy to discuss. The FCA also sent a s.165 information request to the wealth management and stock broker sector in January where they asked how many instances of NFM have been raised against staff in the last 12 months as of 30 September 2023. It is not clear if these firms, for example, will also receive this new NFM survey or whether that question is the extent of the FCA’s enquiry.

Responses are required by COB 5 March 2024 (for wholesale insurers and wholesale insurance intermediaries) and we expect other firms will be given a month to respond once the letter has been received. However, if you believe you will need more time, we would encourage you to start a dialogue with the FCA about this sooner rather than later.

We have significant experience in supporting firms in responding to s.165 requests and in supporting on NFM matters – please do get in touch if you would like us to support you – some key learning points are:

• Ensure you are able to verify every sentence/ piece of data in your response;
• Detail which function has provided the information; and
• Consider which Senior Manager(s) will be responsible for the oversight of the responses, challenging the contents, how they are briefed prior to submission and if there are follow up questions.

Please contact Penny Miller (Partner), Andrea Finn (Partner), Jonathan Thorpe (Partner) or Amy Sumaria (Managing Associate).