Since our article on sexual harassment in the financial service sector at the start of the year, the Treasury Committee published their eagerly awaited report entitled ‘Sexism in the City' in March 2024. This report looked at sexual harassment within the financial services sector and found that sexual harassment is worse in the financial services industry compared with other sectors, citing that 45% of the those working the industry had encountered sexual harassment in the workplace. The Committee called for ‘further urgent action' a result of the ‘shocking' results.
Part of the Committee's aim in writing the report was to establish how much progress had been made within the sector since their inquiry in 2018. The Committee ultimately determined that limited improvement had been made and as such made the following recommendations:
- Adopting a zero-tolerance approach towards sexual harassment, highlighting the need to tackle repeat offenders and improving processes for complaints handling.
- Tackling low-level harassment, for example microaggressions, as well as the more ‘serious' cases, thus reinforcing the zero-tolerance and creating an inclusive space. Recommending training, including training on unconscious biases and being active bystander.
- Highlighting that sexual harassment is an issue for everyone to address, encouraging allyship and active reporting.
- Improving whistleblowing processes.
The Committee called for firms, regulatory bodies and the Government to do more to both protect victims of sexual harassment and to prevent sexual harassment occurring in the first instance.
FCA's focus on non-financial misconduct
The ‘Sexism in the City' report followed the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) joint consultation which looked at proposals for tackling on non-financial misconduct (NFM) in the sector. Through this consultation, the FCA sought to firmly incorporate non-financial misconduct into their regulatory framework by imposing new rules and guidance.
Despite calls for a clear definition of NFM, the consultation did not provide this. It did, however, provide examples of what would constitute NFM and set out factors which should be considered when assessing their NFM had occurred.
Whilst the FCA has been very clear that despite NFM not being financial in nature, it is still misconduct and as such will have serious ramifications, the regulatory body has been open about its limits. The FCA's Chief Executive, Nikhil Rathi, warned the Treasury Committee that the regulatory body would only be able to go so far without changes to employment law coming through Parliament. The FCA's ability to regulate such behaviour is limited to the extent that the conduct is related to that firm carrying out regulated activities. Ultimately, the FCA cannot act where the conduct relates to the individual's private life and has sought to aid the distinction between work life and home life by providing a list of relevant factors to enable firms to self-determine whether an act would constitute NFM. These include whether the conduct occurred on company property, using company property and was against a company client.
The consultation aimed to establish ‘minimum standards' and help firms to understand what is expected of them. The FCA asked for firm to put systems in place which would help give them ‘much better visibility' of those who commit NFM and lessen the risk of such behaviours happening.
The FCA and ‘Sexism in the City'
The Committee welcomed the FCA's proposals but simultaneously acknowledged the limitations on their legal powers and suggested that they should go further with their proposals.
One such suggestion for the FCA was to improve awareness of their whistleblowing line to lessen the ‘fear factor' that victims suffer when deciding whether to report their experiences of harassment. Whilst the Committee acknowledged that the FCA does have a reporting line in operation, the report highlighted that awareness of it was low.
The Committee also highlighted an issue with the widespread use of non-disclosure agreements in sexual harassment cases, calling for the Government to develop ways to prevent this misuse cases and suggesting that the FCA collect more data on the misuse of NDAs where NFM has occurred.
The Committee recommended that the FCA and the Equality and Human Rights Commission clarified ‘how they will work together to enforce' Worker Protection (Amendment of Equality Act 2010) Act given the overlap between the aims of the Act and the FCA's proposals. Considering the FCA's consultation contained proposals rather than confirmed regulatory updates, the FCA will undoubtedly reflect on both the Committee's report and the new Act. Improvement in sexual harassment policy is being encouraged from multiple avenues and the new Act will place a greater responsibility on the employer.
The Worker Protection (Amendment of Equality Act 2010) Act
This Act comes into force in October 2024 and introduces a positive obligation on employers to take “reasonable steps” to prevent the sexual harassment of their workers in their workplace. The onus on employers is now higher as they are now going to be expected to be taking proactive steps to prevent sexual harassment. Where tribunals find that employers have failed in this duty, they will be able to award a 25% uplift in compensation. The introduction of this act will force those employers who do not have adequate procedures in place around sexual harassment to do better.
What should Financial Services firms be considering?
The FCA's proposals and the Committee's recommendations can be used as a starting point for firms when updating their policies and processes. Are their reporting processes operating well and well known about? Is further and more specific training needed? Is there a culture of acceptance and sexism within the workplace? With less than a month until the Act comes into force, if employers have not already, they should be:
- Reviewing their sexual harassment policy. This should be a standalone policy to highlight the importance and focus on the issue particularly in light of the new legislative requirements.
- Reviewing their training around sexual harassment. Training should be specific to the company and tailored to suit different levels within the business.
- Communicating from the top of the business that sexual harassment won't be tolerated.
- Preparing an updated risk assessment to ensure that all reasonable steps have been taken to address key areas of risk for sexual harassment.
Sexual harassment has huge ramifications for both the individuals involved and the company. Whilst the human impact is undoubtedly devastating, companies may also suffer both reputationally and financially if they don't have proper processes and policies in place.
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