Major Step Forward In The Campaign For Fair Treatment Of Bank Staff

All Members

“We recognise that ensuring a fair environment for employees can be a good indicator of a firm’s culture, which we see as important for how it is treating its customers as well.”

They’re the words of the FCA in a recent letter to the union. It’s a crystal-clear indication that the FCA is concerned with how regulated firms treat their staff.

Background

At the end of last year, we wrote to the FCA to present a significant body of evidence we’d gathered which showed inherent unfairness in the application of the FCA’s Conduct Rules and Certification Regime amongst banks.

You’ll no doubt have received some training on the 5 rules set out under the FCA’s COCON 2.1: Individual Conduct Rules. These are:

  1. You must act with integrity.
  2. You must act with due skill, care and diligence.
  3. You must be open and cooperative with the FCA, the PRA and other regulators.
  4. You must pay due regard to the interests of customers and treat them fairly.
  5. You must observe proper standards of market conduct.

On the face of it, the rules are simple and straightforward to understand. But their simplicity regularly causes problems because it means they’re open to interpretation. We found that very often, interpretation and implementation of the Conduct Rules was inconsistent, poorly structured and badly managed, with inevitable unfairnesses in the treatment of staff.

The Issues

We made clear that the most Senior Managers we’d encountered:

  1. Had failed to put in place satisfactory policies and procedures to govern the process for applying the ‘fit and proper’ test and for determining breaches of the Conduct Rules.

  2. Where policies had been put in place, they had failed to take reasonable steps to ensure there were appropriate procedures governing the above matters and/or failed to implement such procedures effectively and fairly. 

  3. Had delegated critical Conduct Rule and Certification decisions to junior staff who clearly lacked the competence, knowledge, seniority or skill to deal with such decisions.
  4. Had failed to provide sufficient training on Conduct Rules to employees.

We called on the FCA to ensure that regulated employers within the financial services industry:

  • Act fairly and transparently when considering potential Conduct Rule breaches.
  • Institute policies and procedures which ensure consistency of decision making.
  • Give proper consideration at a senior level to whether a matter actually warrants a referral to the FCA.
  • Give employees mechanisms to appeal to truly independent parties.
  • Train genuinely senior managers on how to evaluate potential conduct rule breaches, rather than leaving it to inexperienced people or compliance staff to make decisions.
  • Review cases at senior levels, where employees have demonstrable competence, rather than allowing junior staff to make final, career-ending decisions.

FCA Response

In response to our submission, the FCA confirmed its expectations. Emphasising the importance of transparent application of the Conduct Rules and thorough training of staff. Crucially, the FCA said that where employers are considering alleged Conduct Rules breaches or conducting a Fit and Proper Assessment:

“In our view, a fair process would have the same characteristics as a fair disciplinary process. That means that there should be transparency about how decisions are made, independent input to reaching an outcome and a way of appealing the decision internally.”

This is one area where we found employers were not meeting the requirements of the regulator. The FCA’s clarification of its expectation, in response to our campaign, is a major step forward in ensuring staff are treated fairly.

In light of the FCA’s response, we’ll be monitoring closely employer approaches to Conduct Rules and Certification Regime issues. Employers must put sufficient time and money into addressing the issues we’ve identified and ensure that managers with sufficient seniority and expertise are engaged when dealing with potential career-ending issues. We will report any further issues to the FCA.

If you have any questions about this matter, please do contact us here.