Financial firms in the United Kingdom are dismissing staff suspected of bullying and harassment ahead of strict new misconduct rules. The Financial Conduct Authority (FCA) will expand its oversight to include non-financial misconduct for 37,000 firms starting September 1.
For investors, these changes increase regulatory risk as firms face higher accountability for workplace culture and executive conduct.
Shifting Responsibility to Management.
The amended FCA rules target non-bank entities including asset managers, hedge funds, and insurers. The framework moves the responsibility for identifying and investigating misconduct from human resources departments directly to senior managers. This shift ensures that work-related violence, harassment, and bullying are factored into mandatory fitness and propriety assessments for employees.
Lawyers at three London firms said some companies are setting a low bar for dismissals before the deadline. Wendy Saunders, a partner at Lewis Silkin, said she observed cases where firms used minor conduct issues as a pretext to fire underperforming staff. This preemptive action aims to avoid the more rigorous reporting requirements and potential regulatory investigations triggered by the new regime.
Targeting the High-Performing Bully
The new guidance explicitly separates workplace bullying from existing discrimination protections based on race or sex. This allows regulators to penalize “rainmakers” who generate high revenue but create toxic environments. David Cummings, an employment lawyer at KPMG, said the rules provide a regulatory consequence for bullying that does not exist under standard employment law.
The FCA is trying to capture the high-performing bully, who organizations may have traditionally held their nose or been prepared to turn a blind eye to.
Under the updated regime, conduct breaches must be disclosed in regulatory references provided to future employers. This “bad apple” provision is designed to prevent offenders from moving between firms to escape the consequences of their actions. Failure to address these breaches can now lead to career-ending investigations for both the individual and their managers.
Addressing Industry Culture
The crackdown follows a 2024 parliamentary report that described London’s financial center as a hotbed of sexism and bullying. FCA data from that year showed reports of non-financial misconduct surged over 70% during a three-year period. Despite the rise in incidents, more than one-third of firms failed to report these cases to their boards.
While the FCA stated the rules provide necessary clarity, some legal experts worry about inconsistent application. Claire Cross, a partner at Corker Binning, said many employers are reaching knee-jerk conclusions in minor cases to avoid regulatory scrutiny.
Firms are currently conducting scenario-based training for everyone from interns to executives to prepare for the September transition.
The Financial Conduct Authority will implement the new misconduct reporting and assessment rules on September 1.
