The clock is ticking for thousands of City investment firms as the Financial Conduct Authority prepares to unleash sweeping new powers that will force the disclosure of bullying, harassment and other non-financial misconduct. From next month, hedge funds, insurers, pension schemes and brokers will be legally obligated to report serious cases of bad behaviour to the regulator – and to pass on allegations against managers to their prospective future employers.
The move represents a significant expansion of the FCA’s oversight remit beyond traditional financial crime, targeting what regulators describe as “rolling bad apples” – individuals who move between institutions without facing consequences for misconduct. With approximately 40,000 firms now coming within scope of the new regime, industry insiders report a frantic scramble to update policies, complete pending investigations and ensure compliance before the September deadline.
“The countdown is now on for regulated firms to be ready for the new rules taking effect in September,” said Jill Lorimer, a partner at Kingsley Napley specialising in financial regulation. “We are aware of firms brushing up their policies and procedures in this area and ensuring training has been thoroughly refreshed and completed.”
Regulatory Expansion Beyond Financial Crime
The FCA’s expanded crackdown marks a strategic shift in regulatory philosophy, moving away from a narrow focus on market abuse and financial fraud toward addressing the cultural rot that can undermine market integrity from within. Under the new framework, any firm subject to the senior managers and certification regime must report non-financial misconduct of a serious nature to the authority.
This includes behaviour such as racism, sexual harassment, violence, intimidation and other forms of workplace misconduct that the FCA argues “raises wider questions about a firm’s culture, and ultimately harms confidence in financial services.” The regulator has made clear that while its rules and guidance will help industry take a more consistent approach, the primary responsibility for preventing and dealing with such behaviour remains squarely with individual firms.
The expansion follows high-profile cases that have highlighted the limitations of the previous system. Most notably, the recent revelation that Lloyd’s of London failed to properly handle whistleblower reports dating back to 2023, alongside the ongoing legal battle surrounding former Barclays chief executive Jes Staley, who was ultimately banned from senior roles after judges upheld the FCA’s finding that he misled regulators about his relationship with convicted sex offender Jeffrey Epstein.
Industry Response and Compliance Rush
Legal experts say the impending implementation of these rules has triggered what one practitioner described as a “compliance arms race” among City firms. With the deadline fast approaching, organisations are scrambling to finalise internal investigations that might otherwise have lingered indefinitely, while simultaneously overhauling training programmes and updating disciplinary procedures.
“Any firm dealing with allegations against their people now may want to ensure that these processes are wrapped up before the new regime takes effect,” Ms Lorimer noted. “The FCA will no doubt be looking for cases in this area to show it is willing to flex its muscles.”
The urgency is palpable across the sector. Hedge funds, in particular, have reportedly accelerated their compliance timelines, recognising that the new rules will create unprecedented transparency around managerial conduct. Sources familiar with the preparations say many firms are conducting final reviews of their HR records and revising their approach to serious misconduct cases to ensure they meet the new reporting thresholds.
Despite industry concerns about regulatory burden, the FCA appears determined to press ahead with the reforms. An FCA spokesperson declined to comment on specific enforcement priorities but reiterated that the changes represent a necessary step toward addressing systemic cultural issues that have plagued parts of the financial services sector for decades.
High-Profile Cases Set Precedent
The FCA’s push for greater transparency comes amid a growing portfolio of high-profile misconduct cases that have damaged reputations and exposed weaknesses in corporate governance. The ongoing appeal by hedge fund manager Crispin Odey, who seeks to overturn his ban from senior financial roles, provides a stark reminder of the regulator’s willingness to pursue long-term consequences for serious misconduct allegations.
Mr Odey faces multiple allegations of sexual harassment and assault, reportedly from 20 women, according to a Financial Times investigation. While he denies the accusations and claims the FCA treated him unfairly, the case underscores the extent to which the regulator is prepared to maintain pressure on individuals even after they leave their original positions.
Similarly, the Barclays case involving Mr Staley demonstrated how behaviour outside traditional regulatory boundaries can still result in significant sanctions when it undermines market confidence. The judge’s decision to uphold the ban, despite arguments about procedural fairness, sent a clear signal about the FCA’s interpretive latitude in assessing conduct that falls outside conventional definitions of financial misconduct.
These precedents suggest that firms can expect the FCA to apply the new rules with particular scrutiny to cases involving senior personnel, where cultural influence and leadership responsibility intersect with individual behaviour.
Why it Matters
These regulatory changes strike at the heart of financial services’ credibility crisis, offering a mechanism to break cycles of misconduct that have allowed toxic behaviour to persist unchecked across decades. By mandating disclosure of allegations to future employers, the FCA aims to create accountability networks that extend far beyond individual institutions, potentially transforming how the industry attracts and retains talent. The success of these reforms could establish a new standard for corporate governance that extends well beyond the City’s borders, providing a competitive advantage to firms that demonstrate genuine commitment to cultural reform while delivering a powerful deterrent against the kind of behaviour that has historically undermined public trust in financial markets.
