Earlier this year, there was a significant increase in the number of allegations of sexual harassment reported to the Financial Conduct Authority compared to the previous year.
This increase in allegations may have been triggered by a surge of employees returning to work in the office post-pandemic and is indicative of a serious underlying issue within the financial sector.
In light of these allegations, the Treasury Committee launched an inquiry into "sexism in the City", with a focus on examining the barriers faced by women in financial services, particularly in London.
During its first oral evidence hearing, Baroness Helena Morrissey, chair of the Diversity Project, testified as a key witness.
Morrissey emphasised that a major barrier faced by women is workplace culture, warning that the industry operates as an "old boys’ network", in which men and women have vastly different perceptions on how they view the workplace.
Another witness, Mark Freed, stated that the lack of diversity within the financial sector leads to male-centred workplaces that demonstrate a lack of inclusivity towards women.
This lack of inclusivity results in women being subjected to bullying in the form of micro-aggressions, which undermines their sense of safety and respect in the workplace. If left unchecked, these issues can escalate into more severe issues, such as misogyny and sexual misconduct.
What role should the FCA play in diminishing misconduct?
During the hearing, Morrissey discussed the recent consultation paper published by the FCA titled "Diversity and Inclusion in the Financial Sector".
The aim of the paper was to address the lacking diversity and inclusion within the industry, as well as touching on the issues of groupthink and toxic work culture that contribute to increased misconduct.
The paper suggested that there was strong support for the inclusion of non-financial misconduct, such as bullying and harassment, into the current fitness and propriety assessments, as well as the FCA conduct rules.
The FCA acknowledged the psychological damage that these issues can have on victims, as well as implications for the wider firm.
A ‘fear factor’ is preventing both victims and witnesses from speaking out due to fears of disbelief or reputational/career repercussions.It proposed adding a guidance to the conduct rules, explicitly outlining what type of behaviour would amount to a breach, emphasising that "only serious misconduct" would qualify, and factors such as the duration of the conduct and whether the perpetrator is a repeat offender would be considered when issuing sanctions.
Morrissey expressed concerns about the lack of the clear definition and scope of serious misconduct, suggesting that the FCA is "erring on the side of caution".
Morrissey was also concerned with the lack of preventative action taken by City firms, and urged the FCA to strengthen the severity of its disciplinary sanctions in order to deter misconduct from taking place by ensuring that it could have "career-ending" consequences.
What issues are currently preventing action?
The committee heard evidence in relation to the issues that are impeding change. One key commonality that was found in witness testimonies was the presence of a ‘fear factor’, preventing both victims and witnesses from speaking out about bullying and harassment due to fears of disbelief or reputational/career repercussions.
Freed directly called out the silence from men working in the industry, stating that they also have a duty to speak up when they suspect misconduct, in order to ensure that this burden is not solely placed on victims.
This culture of fear-induced silence is impeding change, as it masks the severity of the issues that women face, and therefore furthers the polarisation of male and female perceptions of the workplace.
Additionally, the inherent power imbalances, as well as a lack of transparency, are impeding both the investigative and disciplinary procedures in cases of misconduct.
Erring on the side of caution was found to be a common approach taken by City firms when dealing with harassment, and these instances often end up with the victims choosing to leave the firm, rather than the perpetrator being removed.
Morrissey suggested that we may be at a point where independent investigations are required, in order to eradicate the fear factor and restore confidence in reporting mechanisms.
What will happen next?
The FCA is asking for feedback on their consultation paper by mid-December this year. The regulatory body will then review the suggestions, and subsequently develop a policy statement, outlining key regulatory requirements to be implemented in the New Year.
In addition to the regulatory body’s consultation, there have also been advancements on the legislative front. The recently passed worker protection bill establishes a preventative duty for employers, requiring them to take proactive steps to prevent instances of misconduct in the workplace.
It is hoped that the FCA will release guidance with clear examples of punishable misconduct.Non-compliance with the new legislation could see more firms facing civil action negligence for failing to protect their employees.
This has been accepted as a landmark change for the creation of safer working environments for women, and will hopefully diminish the culture of silence that currently exists within the City.
It is hoped that, in light of the pending implementation of the worker protection bill, as well as the feedback on the consultation paper, the FCA will release guidance with clear examples of punishable misconduct, as well as specific guidelines for investigative and disciplinary procedures that should be followed by the regulated firms when tackling allegations of bullying and harassment.
With the solid preventative approach taken by the new legislation, it is essential that the FCA steps up to ensure that they play their part in enforcing the equally important reactive approach to tackling bullying and harassment in the workplace.
Thomas Beale is a partner and head of workplace bullying and harassment at Bolt Burdon Kemp
