Non-financial misconduct and whistleblowing

The approach of financial regulators in 12 key jurisdictions

Financial services regulators across the globe have recognised the link between deficiencies in organisational culture and individual behaviour and the likelihood of regulatory breaches and poor outcomes for consumers. They are increasingly focusing on areas such as individual accountability, leadership, governance, whistleblowing and incentives. Firms in turn are paying more attention to diversity and inclusion, racial discrimination and mental health in the workplace and the extent to which employees feel safe ‘speaking up’.

Many are now questioning the role that non-financial misconduct should play in assessing the suitability of those working in the industry.

In this report we review the evolving approach to non-financial misconduct taken by national financial regulators across 12 key jurisdictions.  We also consider the general approach to whistleblowing programmes and the specific requirements imposed on financial services firms in this space.

 

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UK D&I discussion paper

UK plans to, monitor track and improve diversity and inclusion in regulated firms - and links to the regulation of non-financial misconduct.

The Frensham decision

Important UK guidance on when non-financial misconduct can impact an individual's fitness and propriety.

Dutch approaches

Suitability and integrity within the Dutch regulatory framework, brought to like with illustrative examples.

Amended ESMA/EBA guidelines

The impact on the regulation of non-financial misconduct of recent proposed amendments to joint ESMA/EBA guidelines on the assessment of the suitability of members of the management body and key function holders under CRD V and MiFID II.

Hong Kong approaches

How Hong Kong financial services regulation and supervision addresses non-financial misconduct.

German approaches

How the concept of “reliability” informs German approaches; and developments in German whistleblowing protections.

US approaches

Examples of the ways that US regulators address non-financial misconduct; and the whistleblowing protections at Federal and New York State law.

Global approaches

How non-financial misconduct features in various regulators’ assessments of individual suitability – and the increasing importance of effective whistleblowing programs.



Key themes

Professional or private?

NFM is difficult to define.

There are important questions about the extent to which conduct in an individual’s private life might impact their professional life – and in some cases it can be difficult to distinguish the two (such as when socialising with colleagues).

Firms face challenges in considering questions of integrity, fitness and propriety, and making such assessments by reference to the extent to which the misconduct engages the relevant regulator’s rules.

When is NFM a financial regulatory issue?

Most jurisdictions consider that conviction for a criminal offence (involving financial or non-financial misconduct) should impact on fitness and propriety.  Outside of this, to the extent that they seek to assess fitness and propriety, many financial regulators will only look at financial misconduct or misconduct ‘in role’.

That said, we are seeing a growing appreciation of the link between an organisation’s culture and the likelihood of conduct failings – and a move towards a broader approach to what is considered relevant to the “suitability” of an individual for a role.

Well-developed whistleblowing protections

Whistleblowing regimes are well established in all the jurisdictions we surveyed.

The majority have rules under general law which cover all corporates.  Many jurisdictions also have whistleblowing regimes specific to financial services.

Firms must be alive to differences between general protections and those that are specific to financial services and ensure compliance with both.

Explore our highlights in 12 jurisdictions across Europe, the Americas and Asia-Pacific.

Zoom in and select a jurisdiction on the map to explore in more detail.

Key Contacts

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