19 April 2024
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The Interplay between Non-Financial Misconduct and the new Individual Accountability Framework

To The Point
(5 min read)

Amid rising concerns over incidents like bullying, sexual harassment, and discrimination in the UK's financial services sector, regulatory bodies such as the Financial Conduct Authority (FCA) are taking proactive measures. Ireland's Individual Accountability Framework (IAF), influenced by the UK's Senior Managers & Certification Regime (SM&CR), could potentially incorporate non-financial misconduct within its remit. The article explores possible ways this could be achieved, such as through the Common Conduct Standards or the Fitness & Probity regime. It concludes that non-financial misconduct and the IAF could mutually reinforce each other, highlighting the need for robust compliance cultures.

Since the beginning of this year there has been a flurry of activity in the UK in relation to non-financial misconduct. In early February, the Financial Conduct Authority (FCA) sent a Notice To Provide Information letter to those regulated firms in the insurance sector requesting completion of a survey by 5 March. This survey sought information on non-financial misconduct that included "individuals’ conduct for issues such as (but not limited to) bullying, sexual harassment, and discrimination whether in or outside the workplace .... incidents that took place at the office, working from home, working offsite, and social situations related to work. This can include incidents that happened in any work-related capacity or event and may include events that have been organised through work, including staff social events, off-site training and conferences, client entertainment or sponsored events. It would not include private events organised by members of staff among themselves with no other connection to work."

The survey comes hot on the heels of the FCA's Consultation Paper on 'Diversity and inclusion in the financial sector – working together to drive change' and the recently published House of Commons Treasury Committee report, aptly titled, Sexism in the City. Interestingly, that Report concluded that "not much" had changed since the last inquiry in 2018. Shockingly and somewhat depressingly, the Treasury Committee Report outlines how prevalent sexual harassment and bullying, including sexual assault and rape, still are in the financial services sector. Moreover, the Treasury Committee wholeheartedly supports the UK Regulators' proposals to "strengthen their non-financial misconduct rules and to enhance their ability to take action against individuals in sexual harassment cases…"

At the same time, in Ireland, we have been busy preparing for the IAF, which has been in effect since 29 December 2023, and the Senior Executive Accountability Regime (SEAR), due to come into effect on 1 July of this year. The aforementioned activity in the UK has gone somewhat unnoticed here. That said, there is no indication, yet, that the CBI will attempt to wade through the murky waters of non-financial misconduct. However, the CBI is very aware of the trends that are taking place in the UK. Just as the IAF was heavily influenced by the UK's Senior Managers & Certification Regime (SM&CR), there is the potential that the CBI will consider non-financial misconduct to be within its remit.

If the CBI were to consider navigating the complex terrain of non-financial misconduct how could this be achieved within the current framework?

One possible option is via the Common Conduct Standards, specifically for Controlled Function (CF) and Pre-Approval Controlled Function (PCF) role holders to act with honesty and integrity. This Standard closely mirrors that of the FCA's Conduct Rule 1, to act with integrity. It was the FCA's Executive Director of Supervision, Megan Butler, who wrote in her 2018 letter to the Women and Equalities Committee that "sexual harassment and other forms of non-financial misconduct can amount to a breach of our Conduct Rules, which include the requirement to act with integrity, and the SMCR imposes requirements on firms to notify us of Conduct Rule breaches." If we see the FCA pursuing this line of reasoning in the UK, the trend may be followed here, given the similarity between the Irish Conduct Standards and the UK's Conduct Rules.

Another potential avenue for the CBI to follow is through their Fitness & Probity (F&P) regime. The F&P Standards specify that a person is required to be honest, ethical and to act with integrity. Having already discussed integrity above, non-financial misconduct may include unethical behaviour and in some cases dishonesty. The Standards currently consider whether a person has been convicted of a criminal offence, subject to criminal investigations or proceedings or subject of civil proceedings, all of which may include non-financial misconduct. Firms would therefore need to consider whether allegations on non-financial misconduct would have implications for a CF/PCF role holder's F&P assessment, both for the purposes of the annual certification, as introduced by the IAF, and for the purposes of the firm being satisfied on an ongoing basis that the CF/PCF role holder is fit to carry on their role.

In conclusion, the relationship between non-financial misconduct and the Individual Accountability Framework in Ireland may be one of reciprocal reinforcement. The IAF provides a structure for holding individuals accountable for misconduct, while incidents of non-financial misconduct underscore the need for robust compliance cultures. Legal professionals play a pivotal role in guiding firms through this complex landscape, fostering ethical behaviour, and ensuring compliance with the IAF.


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If you have a query you would like to discuss, please get in touch with John Maher. 

To the Point 

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