FCA Culture and Non-Financial Misconduct Survey: Key Insights and Implications for Firms

As we approach the festive season—a time where historical data indicates a heightened risk of non-financial misconduct—the FCA has published the results of its Culture and Non-Financial Misconduct Survey.

In February 2024, the FCA surveyed 1,028 regulated firms, including London Market Insurers and Intermediaries, to review incidents of non-financial misconduct over 2021, 2022, and 2023. This was the FCA’s first comprehensive data-gathering exercise on non-financial misconduct across these sectors, marking a significant step toward understanding this issue.

The results are divided into the following categories:

Reported Incidents: All non-financial misconduct incidents from 2021 to 2023.

Detection: How firms identify non-financial misconduct.

Outcomes: Actions taken following reported incidents (e.g., disciplinary measures).

Further Outcomes: Instances where a single incident led to multiple outcomes.

Processes and Procedures: Policies like D&I, whistleblowing, and disciplinary guidelines.

Governance & MI: Oversight, review, and discussion methods for misconduct issues.

Regulatory References: How incidents are documented in regulatory references.

Key Findings

The FCA’s prior commentary on non-financial misconduct has indicated that the insurance sector may have room for improvement. The survey found a marked increase in reported incidents over the three-year period, with London Market Intermediaries reporting an increase from 1.8 per 1,000 in 2021 to 5 per 1,000 in 2023.

However, the FCA emphasises that incident numbers need careful interpretation. A higher number of reported incidents can indicate a culture where employees feel safe reporting issues, while a low number could suggest that employees are either hesitant to speak up or lack reporting mechanisms.

Only 6% of non-financial misconduct incidents in the London Market Intermediary sector were reported via whistleblowing (compared to 32% in banks). This may prompt the FCA to scrutinise the sector’s whistleblowing processes to assess trust levels and process effectiveness. Surprisingly, some firms reported not having a Whistleblowing Policy at all!

What Firms Should Do

• Review and Benchmark: Firms should fully review these survey results and benchmark against them. Any outliers should be assessed to understand their cause, recognising that there may be valid explanations.
• Enhance Reporting Mechanisms: Firms must implement reporting mechanisms for non-financial misconduct that ensure employees can speak up without fear of retaliation.
• Prompt, Fair Investigations: All reports of non-financial misconduct should be investigated promptly, with a consistent, structured approach that includes documentation and evidence of fair handling.
• Strengthen Policies and Governance: Policies and procedures, including whistleblowing and disciplinary policies, may require updates. Governance and MI are essential for oversight, so non-financial misconduct should be a high-profile item on board agendas.

How We Can Help

At Padda Consulting, we’re experts in culture and non-financial misconduct, with extensive experience helping firms implement improvements in these areas. Whether you need guidance on the survey results or a thorough review of your policies, our team is ready to support you in strengthening your approach to non-financial misconduct.

Contact us at info@padda-consulting.co.uk to discuss your needs.