The FCA and the PRA have published joint proposals to boost diversity and inclusion across the financial services sector and to help tackle the scandals that have hit the industry.
In a consultation paper published today, the regulators also outlined measures to make it easier for finance workers to speak out or challenge behaviour they see at their firm.
The proposals include new rules and guidance to make clear that misconduct, such as bullying and sexual harassment, poses a risk to healthy firm culture.
The regulators hope the guidance will help ensure firms can take decisive and appropriate action against employees for such behaviour.
FCA chief executive Nikhil Rathi said: “We have taken a lead among regulators in taking a clear stance that non-financial misconduct, such as sexual harassment, is misconduct for regulatory purposes.
“We’re strengthening our expectations on how the firms we regulate consider such misconduct when deciding whether someone is fit and proper to work within the industry.”
The move follows the allegations of sexual harassment and misconduct against City financier Crispin Odey by 13 women in an investigation published by the FT.
Following the scandal Mr Odey left the hedge fund he set up, Odey Asset Management and questions were raised about how the historic claims were handled by the regulator.
Mr Odey has denied the allegations.
The FCA said it wants to clarify its expectations around non-financial misconduct across the sector.
The measures also aim to enhance the safety and soundness of firms and improve understanding of diverse consumer needs.
The regulators said increased diversity and inclusion in regulated financial services firms can deliver better internal governance, decision making and risk management.
Mr Rathi said: “For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, its vital they attract, retain and promote the best talent.
“The data suggests this isn’t happening. Our proposals will encourage the largest firms to put in place plans and report against their delivery.”
The proposals set flexible, proportionate minimum standards to raise the bar, placing more requirements on larger firms. Proposals set out for firms include requirements to:
- Develop a diversity and inclusion strategy setting out how the firm will meet their objectives and goals.
- Collect, report and disclose data against certain characteristics.
- Set targets to address under-representation.
The regulators said most of the requirements, including setting targets, regulatory reporting and disclosure, would only apply only to the largest firms.
The consultation is open until 18 December. The regulators said they welcome comments on the proposed approach taken and the feedback will be used to develop final rules planned for publication in 2024.