Dear Sir or Madam | Release Date: 6th February 2024

To read a longer summary of this Dear Sir or Madam letter, click here.

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has issued a notice under section 165(1) of the Financial Services and Markets Act 2000 (FSMA) to gather information on non-financial misconduct within Lloyd’s Managing Agents, London Market Insurers, and Insurance Intermediaries. This sector-wide exercise aims to understand the volume, type, and handling of such incidents.

Context of Non-Financial Misconduct

In its portfolio letter dated 20 September 2023, the FCA highlighted the need for an inclusive culture in the wholesale insurance market, emphasising the importance of addressing non-financial misconduct, including discrimination, harassment, victimisation, and bullying. This aligns with the FCA Chief Executive’s consultation on measures to improve diversity and inclusion in financial services.

Survey Details

The survey is designed to collect high-level statistics on non-financial misconduct incidents from 2021 to 2023, including:

• Number and types of incidents (e.g., sexual harassment, bullying, discrimination).
• Methods of detection (e.g., whistleblowing, internal surveillance).
• Outcomes of the incidents (e.g., dismissal, warnings, complaints not upheld).
• Further outcomes (e.g., non-disclosure agreements, employment tribunals).
• The FCA emphasises that a high volume of incidents might indicate a strong speaking-up culture, while low volumes do not necessarily reflect a healthy work environment.

Data Security and Usage

The FCA is using Qualtrics, a web-based tool, for secure data collection. Responses will be confidential, with aggregated data potentially published at the sector level without identifying individual firms.

Legal Implications

Failure to comply with the notice may result in certification to the court, public censure, financial penalties, or search warrants under FSMA. Providing false or misleading information is a criminal offence.

Key Take-Aways and Actions

1. Firms must complete the survey by 5 March 2024, providing high-level statistics on non-financial misconduct incidents.
2. Effective systems should be in place to identify, investigate, and mitigate risks related to non-financial misconduct.
3. Firms must ensure transparency and accuracy in their reporting, with an understanding that the FCA views non-financial misconduct as a serious regulatory concern.
4. The survey is mandatory, and firms must notify the FCA if they face challenges in providing the requested information.

Conclusion

The FCA’s initiative highlights its commitment to addressing non-financial misconduct in the insurance sector, aiming to foster an inclusive culture and uphold regulatory standards. Firms are expected to engage fully in this exercise, contributing to the FCA’s understanding and supervisory work on non-financial misconduct.