It is often said that, to achieve a healthy work-life balance, one must maintain a certain level of separation between professional and personal life. Yet, there is an exception that applies to both facets and is more evidently spanning the domain of both professional and personal – conduct, or more specifically, non-financial misconduct.
Rulebooks aside, the hope is that we act with a certain level of integrity in all aspects of life. Of course, Friday night celebrations and weekend activities are one thing. But what about more sinister conduct happening both in and outside of the office? While not always directly work-related, misconduct reflects on the quality of character exhibited by personnel in an organization, and resultingly, that organization’s overall image.
With this in mind, regulations are beginning to ramp up in outlining considerations around non-financial misconduct. Such regulatory messaging is mainly coming from the Financial Conduct Authority (FCA) and the U.K. prudential regulatory body, though others like the Securities and Exchange Commission (SEC) have also made moves suggesting that this is of increasing importance.
In a London Stock Exchange Group (LSEG) webinar on June 19, experts Rob Mason, Director of Regulatory Intelligence at Global Relay, and Carroll Barry-Walsh, lawyer and founder of Barry-Walsh Associations, spoke with Vince Dimase, Global Director of Sales Strategy and Execution at LSEG about regulations related to effective communications supervision, as well as reputations and recommendations for managing personal conduct.
Beyond solely laying out the rules around business communications and policies on personal conduct within the workplace, Barry-Walsh suggested that a better approach is outlining the expectation of professionalism perpetually:
What we expect from our employees is professionalism. You have to behave professional within the workplace. If you’re going around behaving like a bully, harassing people….you are not behaving professionally…and the essence of professionalism is that you know how to behave in the workplace.
Carroll Barry-Walsh
Barry-Walsh also explained that only stipulating employees abide by detailed guidelines can inadvertently produce unintended results, as it could present a loophole for misbehaving employees to claim that a particular guideline was not explicitly listed in the rulebook. While it’s important to have examples of improper conduct, underscoring that employees are expected to act with professionalism at all times is key.
The FCA defines non-financial misconduct as “individuals' conduct for issues such as (but not limited to) bullying, sexual harassment, and discrimination whether in or outside the workplace.” In a series of actions from the U.K. regulator, including statements, proposals, request letters, and surveys, we’ve seen this topic shape up to be a focal point for the year to come.
To develop a better understanding of these incidents and shape its approach, in early 2024 the FCA released a letter requesting that insurance firms provide information about any instances of non-financial misconduct at their organisation. This included the number of incidents recorded, the means by which they were detected, and how they were handled. Following that, more than 180 banks received the same requests.
Confirming what firms should look out for next, Jamie Bell, Head of Secondary Market Oversight at the FCA, stated in a fireside chat with Global Relay that 1,000 firms across the industry will receive non-financial misconduct request letters.
Mason mentioned that though U.S. regulators are coming at the topic from a different lens more closely aligned with ethics rather than conduct, a cultivated and robust business culture is moving up the priority list across multiple jurisdictions. SEC Director of the Division of Enforcement Gurbir Grewal referenced “tone from the top” within his speech, “The five principles of effective cooperation in SEC investigations,” stating that leaders within an organization should support a culture of compliance.
To do so, Grewal says leaders should be outlining the need to stay within set parameters and demonstrating expected compliant behaviors themselves – a sentiment that Mason shares:
It isn’t so much as tone but behavior from the senior management to set the right example…the training so that everybody understands what good looks like and what bad certainly looks like…and also that the consequences are significant.It isn’t so much as tone but behavior from the senior management to set the right example…the training so that everybody understands what good looks like and what bad certainly looks like…and also that the consequences are significant.
Rob Mason
Regulators are also progressively amplifying and exemplifying transparency to encourage collaboration and candidness with governing bodies and the industry as a whole. In the sense of conduct, this translates to fostering a workplace environment where employees have open lines of communication and the ability to speak up so that misbehavior can be identified and dealt with swiftly.
Chiefly, the attention to non-financial misconduct ties into the interconnectedness between culture and market integrity. Emily Shepperd, Chief Operating Officer and Executive Director of Authorizations at the FCA stated that culture is “what underpins outcomes.” The regulator isn’t looking at non-financial misconduct as separate to financial crime, but as a matter that is equivalent, as it has detrimental effects on work environment, which, in turn, impacts productivity and performance.
Regulatory actions illustrate that the focus on non-financial misconduct and its amalgamation with the category of general misconduct will see firms answering for bad behavior exhibited by those within their firm. Consequently, it is in firms’ best interest to not only outline and exhibit the behaviors that are required of their personnel, but to monitor for any instances of misconduct knowing that the spotlight is on – and firms’ performance better be up to standards.
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