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Sexism in the City and the FCA



Fatima Jama examines the issues in the regulation of non-financial misconduct, in particular, sex offending and gender-based misbehaviour in the financial service industry.

The financial services sector holds major importance in the UK economy, playing a significant role in its GDP, job creation, and international competitiveness. It stands as one of the pivotal sectors in the UK economy, employing over 2.5 million individuals nationwide—more than 1.1 million directly within financial services and over 1.3 million in associated professional services. The sector’s substantial contribution to the UK’s GDP is further bolstered by its £100 billion tax contribution, which plays a vital role in funding public services. It is therefore imperative for the industry to reflect the composition of society and maximise its access to a diverse range of talents.

The Treasury Select Committee

In 2018, the Treasury Select Committee (The “Committee”) identified numerous obstacles hindering women’s progress in financial services, including entrenched workplace cultures, unconscious biases, sexual harassment, bullying and the challenges posed by maternity leave and childcare responsibilities. The Committee proposed various recommendations to mitigate these barriers and enhance gender diversity. Fast forward six years, progress has been sluggish to say the least.

The Committee’s recent inquiry into Sexism in the City in March 2024 assessed the extent of progress made. They uncovered prolific occurrences of sexual harassment, bullying, and even instances of serious sexual assault and rape within the financial services sector, as well as the inadequate handling of such allegations by firms. Of particular concern is the widespread misuse of non-disclosure agreements (“NDAs”), which effectively silence victims, often leading to their departure from the organisation, while shielding perpetrators and allowing them to continue their careers and potentially harm others.

“Attendees reported that, for most allegations of sexual misconduct, little or no action had been taken against the perpetrator who was often able to continue progressing in their career, while the woman reporting the incident often faced negative consequences, including being made to move teams or being forced out of the company or the industry completely,” the Committee said.

Addressing cultural shifts in the finance sector

The Committee highlighted that the primary responsibility for addressing and instigating essential cultural shifts lies with the senior leadership and boards of companies. Companies need to address the “less severe” forms of abusive conduct and “microaggressions” towards women in order to foster an inclusive culture. In such a culture, even minor instances of bullying or harassment should be regarded as unacceptable.

The Committee suggested that financial regulators take decisive action in fostering change and addressing gender-based misconduct. The Financial Conduct Authority (The “FCA”) introduced proposals in September 2023 to bolster their regulations concerning non-financial misconduct, aiming to strengthen their ability to deal with individuals involved in sexual harassment. Part of the current proposals from the FCA requires firms to develop strategies, gather and disclose data, and establish targets. These measures are intended to prevent individuals with a history of misconduct from easily transitioning between jobs.

The FCA offers a whistleblowing line for reporting workplace wrongdoing, although there is limited awareness and understanding of its operation. The Committee recommended the FCA take proactive steps to raise awareness about the availability of its whistleblowing line and clarify the circumstances under which it can be utilised. In particular, it should be explicitly stated that no provision within an NDA can prevent someone from reporting misconduct to the FCA or reporting a crime to the police. The FCA received 249 reports, containing 649 allegations in total in Q4 2023. Reports about culture were widespread, third only to compliance and fitness propriety.

Issues surrounding regulation

The Committee raised concerns that data collection requirements could incur significant additional costs for firms with unclear benefits. Additionally, the regulations may not effectively address entrenched cultural issues and diversity shortcomings in many smaller firms. There is a concern that such requirements could merely become another checkbox exercise for compliance, with minimal impact on fostering cultural change.

The CEO of the FCA, Nikhil Rathi also highlighted the challenges in regulating non-financial misconduct in the financial service industry. Rathi told the Committee that although the FCA was able to handle anonymous tip-offs, it could be hard to take action if people did not want to be identified.

“The challenge on the anonymity point … is that if we are going to use our prohibition power, we are ending the livelihood of an individual… And that individual will say they have a right to know the evidence upon which we are basing our decision… And that’s where the challenge comes with anonymity, because if we don’t give the person whom we are prohibiting the right to reply to the allegations … it can be very hard where a victim quite understandably wants to retain anonymity, it’s quite hard for us then to take that all the way to enforcement action.”

Alongside this, there is no defined list of offences that automatically bans an individual in the finance sector. Rathi highlighted that in 2021, the FCA was informed by the Upper Tribunal that a conviction for attempted sexual grooming of a child aged under 16 was insufficient grounds for a bar.

“The fact that there isn’t a prescribed list of those serious offences where if you are found convicted of those offences you are automatically prohibited from the regulated sector … means that we have to, in each case, demonstrate that the conviction or the conduct is sufficiently relevant to the financial services role that they are performing that it merits us using our prohibition powers,” he told the Committee.

The case Rathi is referring to is Frensham v Financial Conduct Authority [2021] UKUT 222 (TCC).
This decision was reviewed at the time by my colleague Mark Watson here.

The Upper Tribunal dismissed an appeal brought by Jon Frensham, challenging the FCA’s decision to deny him permission to operate as a financial adviser in October 2020. The decision followed Frensham’s conviction in 2017 for an offence unrelated to dishonesty or his professional practice. The FCA contended that Frensham was not a fit and proper person to perform any function in relation to any regulated activity, as he lacked the necessary integrity, and posed a risk both to consumers and to confidence in the regulation of the financial sector.

While the Upper Tribunal upheld the FCA’s decision, it did so for different reasons. The Tribunal acknowledged a significant gap between Frensham’s offence and his profession, noting the FCA’s failure to establish a direct link. Interestingly, the Tribunal indicated that had the FCA’s decision relied solely on the conviction, it would have requested reconsideration. However, the Tribunal found two additional factors that justified the FCA’s decision: Frensham’s commission of the offence while on police bail for another suspected offence, which suggested a propensity to disregard regulatory obligations, and his failure to report his arrests and bail conditions to the FCA.

[198] “In our view, the reasons why those failures occurred follow a similar pattern. They all provide evidence that in his dealings with the Authority Mr Frensham decided to put his own interests and those of the Firm before the need to comply with the clear obligations to be open and transparent with the Authority”.

Conclusion – How do we deal with Sexism in the City?

The necessary cultural shift to combat sexism in the City cannot solely rely on processes or procedures; while they play a part, they are insufficient on their own. To effect change, it is crucial to clearly define what is acceptable and what is not, and consistently uphold those standards. There is also a pressing need for more education on recognising bullying and harassment. While some instances are blatant, others are more subtle. More efforts should be directed toward equipping individuals to identify and address such behaviours, empowering them to intervene appropriately. However, without a foundation of safety provided by Government and financial regulators, fear and inertia will persist, impeding progress.


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