Whistleblowers made a record number of reports to the U.K. regulator about "nonfinancial misconduct" at regulated firms including sexual harassment and bullying in 2018, a senior Financial Conduct Authority executive said.
"Over the last 12 months, we have seen a noticeable upturn in reports which concern issues like discrimination and sexual harassment in financial services. Our message to firms is clear: nonfinancial misconduct is misconduct, plain and simple," Christopher Woolard, executive director of strategy and competition at the FCA said in a Dec. 19 speech.
After Megan Butler, executive director of supervision for wholesale and specialist investment at the FCA, spoke out in May about nonfinancial misconduct, including sexual harassment, the regulator has seen its highest-ever number of disclosures from whistleblowers, Woolard said. These include issues around gender, racism, physical bullying and homophobia.
The FCA's whistleblowing team received 20 reports of nonfinancial misconduct in 2017, but in 2018 it has received 64 to date, Woolard said, adding that he suspected that the FCA had "only scratched the surface."
A number of financial services firms are responding to #MeToo in a way that promotes division between genders rather than inclusion, Woolard warned. "We are seeing some firms take what they would regard as a zero-risk approach in response to #MeToo, which, rather than having the intended effect of making women safer in the workplace, I fear may see the re-emergence of cozy boys' clubs and men-only networks. That misses the point."
"In 2018, we might hope that all colleagues in a firm could be treated with respect by leaders as a matter of basic character. As the regulator, we will certainly expect so," he added.
Diversity and inclusion is a "supervisory priority" for the U.K. regulator, and not just a matter of social justice, Woolard said. It is a "core part" of how the regulator assesses the culture of financial services firms, he added.
"Firms which foster an inclusive and diverse culture open themselves up to a wide range of perspectives. That means less fettered, more productive internal debate. Where a culture is open, risks are flagged, experiences are shared and decision-making is enhanced. But in a culture where colleagues are afraid to speak up, unethical behavior can gain a foothold," Woolard said.
The FCA may consider diversity and inclusion issues when assessing the "fitness and propriety" of senior managers, he added.
"In our judgment, the way a senior manager approaches issues around diversity may be relevant to our assessment of their competence and character," he said.
This is a message that the industry needs to hear, Woolard urged.
The FCA is an active participant in the Women in Finance initiativ, he added. This is an initiative launched in 2016 that asks financial services firms to commit to taking steps to support the advancement of women in senior roles and requires them to make an annual disclosure about their progress.