The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have made it clear that they want to drive greater diversity and inclusion (D&I) and higher standards of personal integrity in the financial services industry. The regulators are currently consulting on new rules and guidance that aim to enhance D&I within regulated firms and toughen up Conduct Rules and fitness and propriety in the area of non-financial misconduct. The industry needs to consider these proposals carefully. Below we summarise the proposals and set out some top tips for firms who want to get out ahead of the proposals. If you would like our detailed Client Guide on steps for implementation and feedback to the FCA, you can register to express your interest in receiving a copy using the form at the bottom of this article.
Step change: New UK proposals on diversity & inclusion and non-financial misconduct in the financial sector – five practical tips for firms
The FCA and PRA have been clear that research shows diversity in organisations helps to reduce groupthink, supports healthy work cultures, improves the understanding of and provision for diverse consumer needs and unlocks talent. They believe better diversity and inclusive cultures can improve outcomes for markets and consumers, and this will in turn support the competitiveness of the UK’s financial services sector.
Is that ambition served by their new Consultation Paper (CP) that sets rules on D&I reporting, governance and management responsibility and broadens the concept of fitness and propriety to private life?
Here's a snapshot of the proposals and five practical steps for implementing them:
Overview of the FCA’s Proposals
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Five practical tips to get ahead of the changes
Many firms will be looking to start implementing changes and develop processes now in readiness for the rules anticipated next year. Here are some practical suggestions:
- 1) For firms with no formal D&I strategy in place, bringing one in is a good place to start. For those with an existing strategy and annual report, start looking at how to update and amend these in line with the CP core expectations.
- 2) Review existing or develop new policies and procedures and embed them into the organisation to demonstrate you are progressing a D&I strategy. Factor in training and communication plans.
- 3) Start to assess what systems and controls are in place for the collection of data and begin collating data on current diversity to help meet future data reporting requirements. Check any collection or reporting of diversity data complies with data protection legislation.
- 4) Revisit internal and external communication processes and assess whether management information processes (through which the board can receive updates) are adequate or would need to be changed.
- 5) For the amendments to integrity, review and update staff onboarding processes, annual self-appraisal as part of the fit and proper assessment, Conduct Rules and fitness and propriety breach framework, staff training, regulatory reference procedures and regulator reporting.
To help you navigate the proposed diversity and inclusion changes, we have produced a comprehensive Client Guide. The guide has detailed implementation steps and suggested feedback to the regulators ahead of the CP deadline on 18 December.
Request a copy of the comprehensive Client Guide below:
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