Britain’s financial firms are stepping up their focus on employee behavior, with some weeding out employees suspected of inappropriate behavior such as harassment and bullying ahead of new rules aimed at curbing an industry that lawmakers have called a hotbed of abuse and bullying, lawyers told Reuters.
Lawyers at three London law firms said some companies are laying off such employees ahead of new rules on September 1 that will increase scrutiny, reporting requirements and the potential consequences of mishandling cases of non-financial misconduct.
The UK’s Financial Conduct Authority (FCA) is revising its rules of conduct and qualifications tests to address serious, work-related bullying, harassment and violence against colleagues at 37,000 non-bank firms including asset managers, hedge funds and insurance companies.
this Revised Rules and Guidelines Clarify how companies should consider non-financial misconduct when assessing an employee’s fitness and suitability, and put the responsibility on managers, not HR, to identify, investigate and report potentially serious cases.
The changes are intended to bring non-bank financial rules into line with those already in place for banks, although the new guidance spells out more clearly the kinds of misconduct all companies should address.
Companies have low thresholds for dismissal, and in some cases HR may even use the upcoming rules as an excuse to part ways with employees who don’t meet expectations, the three lawyers said.
Wendy Saunders, a partner at law firm Lewis Silkin, said she had seen two or three cases in which companies appeared to “dress up minor behavioral issues as non-financial misconduct” to fire poor performers.
Three lawyers from different firms said they are holding scenario-based training sessions for executives, managers and even interns on the new rules, which include liability for managers failing to address breaches of conduct rules.
Dealing with the Rainmaker Bully
The FCA’s rules, published alongside extensive guidance and detailed illustrative scenarios and flowcharts, separate legal protections for conduct such as bullying from discrimination based on characteristics such as race, gender, disability or religious belief, going beyond employment law.
KPMG employment lawyer David Cummings said the rules would allow companies to address underperforming star employees by providing regulatory consequences for bullying that do not exist in employment law.
He said: “The FCA is trying to catch those bullies who are performing well and organizations might have traditionally turned a blind eye to them or been prepared to turn a blind eye to them because they are the creators but they are toxic to the workplace environment.”
Reuters interviewed seven mid-sized law firms with sizable legal practices and attorneys at one of the Big Four professional services firms.
Lawyers at two of the firms said they were unaware of any employees who had been fired over allegations of conduct that preceded the new rules. The remainder either reported a small number of dismissals or confirmed behavior that was increasingly of concern to managers.
Asked for comment, the FCA did not mention directly examples of how the increased focus on misconduct could be abused, but said the new rules were clearer.
“Our rules and guidance will help industry take a more consistent approach to addressing non-financial misconduct, but the primary responsibility for preventing and dealing with such conduct lies with businesses,” the regulator said in a statement.
A spokesman for the Alternative Investment Management Association said the body had issued guidance for members.
The spokesperson said: “Many are reviewing their policies, training and governance arrangements as they prepare to go live, although the actual impact will depend on the framework they have in place.”
The Association of British Insurers and the Association of Managed Funds did not immediately respond to Reuters’ requests for comment.
challenging culture
The culture of the UK financial services industry has long been a concern.
MPs on the parliamentary finance committee expressed alarm at the prevalence of sexual harassment and bullying and the poor handling of such allegations in a 2024 report into gender discrimination in the London financial centre.
An FCA study that year showed that reports of misconduct such as bullying surged by more than 70% in the three years to 2023, with more than a third of companies failing to report cases to their boards.
Under the new rules, conduct breaches must be disclosed to prospective employers based on regulatory references or formal qualifications assessments, aiming to prevent “bad apples” who avoid the consequences by changing jobs. Instead, offenders face the risk of potentially career-ending regulatory investigations.
The guidance also covers social media activity.
Lawyers are now concerned that the rules may be applied inconsistently, in part because companies fear ending up in the center of regulation.
Claire Cross, a partner at law firm Corker Binning, said: “From what I’ve seen, many employers are still likely to reach knee-jerk conclusions in relatively minor cases, often opting to withdraw individuals rather than risk potential criticism from regulators.”
(Reporting by Kirstin Ridley and Phoebe Seers; Editing by Tommy Reggiori Wilkes and Tomasz Janowski)
