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Dear CEO | Release Date: 3rd January 2020

To read a longer summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Short Summary

The FCA has issued a firm letter to CEOs of wholesale general insurance firms, underlining the urgent need to tackle non-financial misconduct, such as discrimination, harassment, and poor diversity and inclusion practices within the sector. This misconduct not only undermines firm culture but also poses significant risks to market integrity and consumer well-being. The letter underscores that such behaviours are considered serious failings, reflecting broader cultural issues within firms that require immediate and robust intervention.

The FCA explicitly connects non-financial misconduct to the broader regulatory framework, emphasising that failures in handling these issues can impact a senior manager’s assessment under the Senior Managers and Certification Regime (SM&CR). The regime mandates that leaders be responsible for the actions within their areas, including addressing non-financial misconduct effectively. The FCA warns that failure to address these issues could lead to conclusions that senior managers are not fit for their roles.

Firms are expected to foster a healthy corporate culture by aligning their purpose, leadership, people management, and governance structures to promote positive outcomes for both employees and customers. This includes establishing clear purposes that resonate throughout the organisation, ensuring robust whistleblowing processes, and setting up incentive structures that promote good behaviour rather than harmful practices.

Key Take-aways and Actions:

Firms must review their culture and governance mechanisms to ensure they effectively prevent non-financial misconduct. They should reassess the fitness and propriety of their senior managers to handle these issues, emphasising the alignment of corporate strategies with ethical conduct and regulatory requirements. The FCA expects firms to actively participate in cultural assessments and engage with regulatory efforts to transform culture within the industry. Firms failing to meet these expectations may face significant regulatory scrutiny and action.

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