23 November 2018 Nicola Rabson Sexual harassment - Culture - Regulator - Misconduct - FCA
The ‘Culture’ Series: Sexual harassment and the regulator
This blog post is the first of a series of posts where I look at the tricky issue of culture in the workplace.
Am I the only person who has read and re-read Megan Butler’s letter to Maria Miller MP of 28 September and struggled to understand what it means for regulated firms?
On 28 September 2018, Megan Butler, the FCA’s Executive Director of Supervision – Investment, Wholesale and Specialists Division, responded to the recent report by the Women and Equalities Committee on sexual harassment in the workplace. The views and statements put forward by Megan Butler inform us of the FCA’s views on this issue, but also lead to further questions and considerations for employment lawyers and firms alike.
I don’t think any sensible person will disagree with the statement that sexual harassment is misconduct which can drive a poor culture. In fact, I would rather state that any harassment will impact the culture of a workplace and it is a question of the extent of that impact. It is also correct that sexual harassment (or indeed any harassment) is a misconduct that must not be tolerated in any working environment and needs to be proactively dealt with by employers. This is not new, nor should it be contentious. However, the statement that the regulator views “sexual harassment as misconduct within the scope of [its] regulatory framework” does raise an awful lot of unanswered questions and concerns.
To start with, whilst I recognise that Megan Butler’s letter is clearly in response to the Women and Equalities Committee’s report about sexual harassment in the workplace, can it be correct that other forms of harassment are not misconduct that fall within scope? I suggest not, but in the absence of reference to other forms of harassment, it does beg that question.
Secondly, when the word ‘misconduct’ is used, I cannot help but wonder in what sense it is referenced. Is it in the sense of determining whether a dismissal of an employee is fair under the Employment Rights Act? Is it misconduct for the purposes of the FCA’s own conduct rules? Or is it some other meaning?
If it is meant as misconduct for the purposes of the SMCR which, as stated in the letter, is a “key part of [the FCA’s] supervisory framework”, why and how should firms tackle this when assessing whether to make a notification or to certify an individual? I can see, as I am sure can most people, that acts of sexual harassment may well be relevant to the assessment of whether an individual is fit and proper. However, the conduct rule which states “You must act with integrity”, is the only rule that would make sense applying here in assessing misconduct for sexual harassment. But when you read the FCA’s own guidance on what this rule means, it focuses almost entirely on breaches that have an impact on the client and not on workplace culture or other employees.
Also, if, which appears to be the case, the regulator does want such behaviour to go to the assessment of fitness and propriety, how far does this go? Are all historical allegations and findings to be considered? Should court and tribunal judgments also be checked? Is behaviour outside the workplace relevant?
Megan Butler’s letter ends with stating “How firms handle poor personal misconduct, including allegations of sexual misconduct, is a topic which we [the FCA] are increasingly discussing with firms”. The letter leads to many unanswered questions and considerations, which the regulator will need to address in the near future. But until then, employment lawyers and firms alike are having to address these questions on a case by case basis. In the meantime, I also question whether the phrase “poor personal misconduct” really needs the ‘poor’ and the ‘mis’!