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In a significant move to strengthen integrity and accountability within the UK’s financial sector, the Financial Conduct Authority (FCA) has announced it will broaden its rules on bullying, harassment, and other non-financial misconduct to cover over 37,000 firms operating in the City. This expansion targets the long-standing issue of “rolling bad apples”—senior individuals who move between firms to escape the consequences of their poor conduct. The new regulations are aimed at fostering healthier workplace cultures and rebuilding public trust in the financial industry.
I. Expanding Oversight Beyond Banks
1. From Banks to a Broader Financial Sector
Previously, the obligation to report serious personal misconduct—such as harassment, bullying, or discrimination—was limited to banks. Under the new rules, firms across a wide spectrum of the financial industry, including hedge funds, insurers, and pension providers, will also be required to report “substantiated cases of poor personal behaviour” by senior managers. These disclosures must be shared with the FCA and also with prospective employers performing “fit and proper” assessments of job candidates.
2. The Role of SM&CR in Accountability
The rule change is built on the Senior Managers and Certification Regime (SM&CR), which was designed to ensure accountability among top executives for misconduct occurring under their leadership. By extending SM&CR obligations to thousands of additional firms, the FCA is closing the loophole that allowed individuals with problematic behaviour to avoid scrutiny simply by switching jobs.
II. Preventing “Rolling Bad Apples”
1. Targeting Cultural Failures
The FCA’s Deputy CEO, Sarah Pritchard, emphasized the cultural roots of many market failures. According to Pritchard, environments where bullying and harassment go unchecked often reflect broader problems in decision-making and risk governance. “Our new rules will help drive consistency across industry and support the vast majority of firms that want to do the right thing to deepen trust in financial services,” she stated.
2. What the New Rules Cover
Set to take effect on 1 September 2026, the expanded misconduct rules will address a range of non-financial issues, including but not limited to sexual harassment, racism, intimidation, and physical or verbal abuse. These behaviours, while not linked to financial wrongdoing, are seen as red flags for toxic workplace cultures and poor corporate governance. Notably, the new standards will not apply to entities such as payment and e-money firms, credit rating agencies, or regulated investment exchanges, as these are not currently governed by the SM&CR framework.
3. Bridging the Gap in Reporting Practices
By mandating cross-firm disclosures of misconduct, the FCA aims to eliminate the information gap that allows problematic individuals to be rehired without their new employers being aware of past behaviour. This not only protects employees but also helps firms avoid reputational and legal risks associated with employing individuals with a history of misconduct.
III. Balancing Regulatory Enforcement with Business Concerns
1. Industry Pressure to Reduce Regulation
The introduction of these rules comes at a time when the FCA, along with other regulatory bodies, is under increasing pressure from the government to streamline financial regulations. Policymakers have argued for reducing bureaucratic red tape to make the UK more competitive post-Brexit and to stimulate business growth. Despite this, the FCA insists that ensuring ethical leadership and workplace standards cannot be compromised.
2. High-Profile Cases Reinforce the Need
The urgency of the reforms has been highlighted by several high-profile scandals, including the recent tribunal ruling against former Barclays CEO Jes Staley. The tribunal upheld a lifetime ban for Staley, who misled the FCA regarding the nature of his relationship with convicted sex offender Jeffrey Epstein. Such cases underscore the importance of stringent accountability standards, not only for financial misconduct but also for ethical failures.
IV. Industry and Public Reaction
1. Support for Ethical Clarity
While the expanded rules have sparked debate about the extent of regulatory oversight, many within the financial services sector have expressed support for a clearer ethical framework. For companies aiming to maintain robust governance and positive workplace cultures, these new requirements provide a mechanism to screen candidates and foster trust.
2. Protecting Whistleblowers and Staff
The move is also seen as a win for whistleblowers and employees who have long been vulnerable in environments where misconduct was tolerated or overlooked. By requiring firms to disclose credible reports of serious behaviour, the FCA is empowering staff and encouraging companies to handle complaints more seriously.
Conclusion
The FCA’s decision to broaden its rules on bullying and harassment marks a turning point for UK financial regulation. By extending the scope of misconduct reporting to over 37,000 City firms, the regulator aims to halt the cycle of “rolling bad apples” and promote a culture of transparency, accountability, and respect. Though the reforms may add complexity for some businesses, they ultimately serve to protect reputations, employees, and the integrity of the financial system as a whole.
