City firms rarely dock pay for misconduct, FCA survey finds

City firms are only rarely docking pay and bonuses in cases of bad behaviour including sexual harassment, bullying and drug use, according to the industry’s watchdog, which recorded a 40% rise in complaints about non-financial misconduct last year.

The findings are the result of the City regulator’s first survey looking at the issue, which was launched in the wake of high-profile allegations of sexual harassment, including those against individuals at the Confederation of British Industry (CBI) lobby group.

The survey by the Financial Conduct Authority (FCA) – which covered 1,000 brokerages, corporate and investment banks, and insurance-related firms in the Lloyd’s of London market – found complaints about non-financial misconduct had grown steadily in the three years to 2023. The organisations reported 1,363 incidents in 2021, another 1,670 in 2022, and a jump in complaints to 2,347 in 2023.

The FCA said it was hard to determine whether staff misbehaviour was getting worse, or whether victims felt safer about speaking up. It also said the upward trend was probably influenced by the Covid pandemic, given that staff had since steadily returned to the office after lockdowns and other restrictions.

Across the three-year period, bullying and harassment were the subject of 26% of complaints, while discrimination accounted for 23%. The remaining 40% covered “other” allegations of misconduct, ranging from the fallout from people bringing their pets to work and abusing the company’s expenses system, to offensive language, possession or use of illegal drugs, and misbehaviour linked to drinking.

Concerns over harassment and discrimination were also raised in the Treasury committee’s Sexism in the City inquiry earlier this year. It found that many women believed an “old boys’ club” culture had persisted, and reported that sexual harassment had merely shifted away from the office to conferences and work trips.

The FCA report found disciplinary action had been taken in 73% of violence or intimidation incidents, and 64% of sexual harassment incidents. Verbal warnings were often used in reaction to breaches in the “other” non-financial misconduct category.

About 21% of cases involving violence and intimidation, sexual harassment, and illegal drugs resulted in dismissal.

However, firms rarely punished staff with pay cuts, with salaries being docked in 1-3% of cases. Firms also rarely clawed back bonuses; in the few cases where pay was docked, it was often from future bonuses.

The FCA said it would not take any action as a result of the survey, and was leaving it to industry bodies such as UK Finance and the Association for Financial Markets in Europe (AFME) to review the findings with their members.

“We want this data to support financial firms by providing their management teams and boards with an opportunity to consider if they stand out, and, if so, why that might be,” one of the FCA’s directors, Sarah Pritchard, said.

UK Finance said firms would use the report to “enhance the approach being taken to dealing with misconduct”.

AFME said: “Our members have made considerable strides over the past decades to strengthen and promote a culture of inclusiveness and fairness, and ensuring they provide an environment where their people can be their best. We look forward to continuing to work with our members, the FCA and others in the development of additional industry guidance and cultural best practice for the benefit of the industry.”