UK Financial Regulator Expands Bullying and Harassment Rules to Cover 40,000 Firms

Thousands of financial firms in the United Kingdom are preparing for incoming regulations that will require them to report incidents of workplace bullying, harassment, and other non-financial misconduct to regulators and potential employers. The Financial Conduct Authority (FCA) is expanding rules that previously applied primarily to the banking sector to encompass nearly 40,000 financial institutions, including hedge funds, insurance companies, pension funds, and brokerage firms.

Beginning in September, companies governed by the FCA’s senior managers and certification regime must inform the regulator of serious non-financial offenses, including sexual harassment, racism, violence, and intimidation. Under the updated framework, businesses will also be obligated to provide details of past misconduct allegations to prospective employers when former managers apply for new positions, a measure designed to prevent individuals from evading accountability by changing firms.

Legal advisors indicate that financial institutions are currently updating internal policies, conducting mandatory employee training sessions, and working to complete pending internal inquiries before the rules take effect. Jill Lorimer, a partner focusing on financial regulation at law firm Kingsley Napley, observed that companies are revising their procedures, noting that “no firm will want to be the target of high-profile regulatory attention.”

The expansion comes amidst scrutiny of executive behavior across several major UK financial institutions. At insurance market operator Lloyd’s of London, former chief executive John Neal failed to declare a relationship with a female colleague, and the firm disclosed that internal whistleblower reports from 2023 had been improperly handled. In another case, tribunals upheld an FCA ban preventing former Barclays chief executive Jes Staley from holding senior industry roles after finding he misled officials about his connection to convicted sex offender Jeffrey Epstein.

The FCA is also defending a decision to ban hedge fund founder Crispin Odey, who is attempting to overturn the sanction through legal action. The regulator asserted that Odey tried to obstruct an official investigation into sexual misconduct allegations at his firm, which involved claims from 20 women reported by the Financial Times. Odey has denied all allegations, asserting in a witness statement that he did not impede the investigation and was treated unfairly by the regulator.

While some politicians and industry groups maintain that additional reporting requirements create excessive red tape that hinders British economic growth and hiring, supporters argue that regulating personal conduct enhances industry culture and international competitiveness. Commenting on the changes, an FCA spokesperson noted that unaddressed misconduct “harms confidence in financial services,” adding that while rules provide consistency, primary responsibility for managing workplace culture remains with individual firms.

Background

The Senior Managers and Certification Regime (SM&CR) was established by UK financial regulators in the wake of the 2008 global financial crisis to ensure personal accountability for top executives within financial institutions. Initially targeted at the banking sector, the framework sets standards for fitness and propriety that individuals must meet to hold key leadership positions.

In recent years, financial regulators internationally have broadened their focus beyond conventional financial infractions, such as market manipulation or fraud, to encompass non-financial misconduct. Regulatory bodies maintain that severe workplace issues, including harassment and discrimination, directly reflect an organization’s governance standards, risk management capabilities, and overall market reliability.