Mr Rathi says financial services jobs «should be safe places for women» in light of Audie's allegations. Photo: Eddie Mulholland
The City watchdog is to begin cracking down on workplace misconduct following sexual harassment allegations against hedge fund tycoon Crispin Odey.
In a consultation paper to be published this week, The Financial Conduct Authority (FCA) will propose tougher rules against offenders and companies that fail to punish abusive behavior at work.
The changes will include new guidance on «serious» cases of harassment and bullying» and how «non-financial misconduct» forms part of the regulator's «fit and proper conduct» test for financial services staff.
Nikhil Rathi, chief executive of the FCA , told The Telegraph: “Workplaces in financial services must be safe for women.
“Companies that do not have an environment in which such serious issues are addressed and addressed are unlikely to be companies that have healthy environment in terms of risk management. We want to make sure we're proactive about this.»
He added that the rule changes would provide «clarity» on how city employees can be fired for failing to meet the «fit and proper» test. for non-financial offences.
The watchdog will also seek to require companies it regulates to recognize “lack of diversity and inclusion” as a “non-financial risk”.
It comes after Mr Audie, the founder of London's top hedge fund firm, was sacked from the firm following allegations of sexual harassment and assault against female colleagues over a 25-year period.
The law firm representing Mr Odey said he «vehemently disputed» the allegations.
Hedge fund tycoon Crispin Audie was fired from his firm after being accused of sexual harassment and assault against colleagues. Photo: Julian Simmonds
The scandal has raised questions about the FCA's oversight of Odey Asset Management, which has been under investigation by the regulator for two years. years before further allegations of misconduct were reported.
However, during this period the regulator made no official announcement about its investigations.
The FCA's crackdown on workplace misconduct comes as Rathi's attempts to return the city's top regulator to the front line after a summer dominated by the debanking scandal and concerns that lenders failed to pass on rising interest rates to savers.
The consultation will include recommendations on other environmental, social and governance (ESG) issues, namely diversity and inclusion in the Square Mile.
While the regulator is committed to promoting ESG, Mr Rathi said one An area of concern for him is how ESG investing impacts the defense industry.
Since Russia launched its invasion of Ukraine last year, questions have arisen about ESG funds pressuring investors to avoid backing weapons companies. Industry leaders say the war should remind investors of the ethical value of the defense industry.
Mr Rathi said: “Over the last couple of months there have been conversations about defense companies and their access to services. From a personal perspective, I grew up in Barrow-in-Furness, a town whose main employer was a large defense company.
“Therefore, [I] fully understand how important the efficient operation of these companies is to the security of the country, as well as to our industrial center.”
“Ultimately, the choice of banking services for them and other businesses will be something that the government will have to decide think.»
However, after a week in which Prime Minister Rishi Sunak relaxed some of the government's key environmental policies, Mr Rathi said Downing Street's change of course would not change the FCA's approach to net zero.
Mr Rathie said Downing Street's decision to relax its green policies would not change the FCA's approach to net zero. Photo: Chris J. Ratcliffe/Shutterstock
Last year the watchdog required listed companies to publish climate-related disclosures as part of the UK's «comply or explain» commitment to achieving net-zero carbon emissions by 2050.< /p>
Mr Rathi said the FCA's focus is on developing and implementing international sustainability standards and the Government supports this work.
He added: “The net zero transition is an area where we have a wealth of experience in in terms of insurance, financial technology and the banking system.
“In our commission letter, which was issued to us by the Chancellor, we are obliged to take into account the government policy in this area.
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“So it is within that framework that we are working incredibly hard internationally to develop international standards which we will then seek to implement here in the UK.”
The “comply or explain” supervisory regime is one of areas that have recently come under fire for putting pressure on business, with City heavyweights complaining it has become too tough and is undermining London's competitiveness as a global financial centre.
There are growing concerns that the city is losing its appeal as a leading global financial centre. financial hub as a number of companies have been moving their stock exchange listings to the US in recent months.
However, Mr. Rathi stated that he did not do so. I think the Square Mile has been in a state of constant decline.
He added: “I am optimistic that we remain the largest financial center in Europe, the largest capital raising center in Europe, the largest debt issuing center. We must keep up with the times.»
He pointed to the «very, very radical reforms» the FCA is consulting on in relation to its listing rules, which include scrapping the current premium and standard rate system and replacing it with a «single segment» regime with less onerous rules.
< img src="/wp-content/uploads/2023/09/4db6d8fc675a779e0aee6bbbaf72b48b.jpg" /> British microchip designer Arm is an example of its recent defection from London and the FCA. Photo: BRENDAN MCDERMID/REUTERS
One recent successful listing that eluded London and the FCA was British chip designer Arm, which went public on the New York Stock Exchange earlier this month with a market value of almost $70bn (£56.4bn).
Mr Rathi declined to say how close regulators and government officials came to persuading Arm to list in London, but said no change in the rules would make a difference.
He said: “We want to make sure we have a capital market that is attractive to companies of all sizes and in all sectors. And although this is precisely what our reforms are aimed at… it is unlikely that this or that rule will make a difference in each individual case. And it's much more about the entire ecosystem.»
Mr Rathi also said the city needs to have an «open conversation about the risks» and whether it wants to accept a higher level of what's «coming not so.”< /p>
He added: “There needs to be a balance between the UK's traditions of governance and risk. And we had a really vigorous live debate, with some very compelling views coming from different groups.
“One of the options that faces us is that if we allow more risk in the system, If we cut back on some of the checks we do before listing a company and rely on disclosures afterwards, more things will go wrong.”
However, not everyone is convinced that the FCA is striking the right balance. Earlier this year, Nick Storonsky, chief executive of fintech bank Revolut, railed against the UK's «extremely bureaucratic regulator».
Revolut is fighting to apply to the City to become a fully authorized lender in the UK. The company applied for a license in January 2021, but has not yet received approval.
Earlier this year, Revolut chief Nick Storonski hit out at the UK's «extremely bureaucratic regulator» Photo: Piaras – Midhich/Getty Images/Sportsfile
Asked about Mr Storonski's comments, Mr Rathi said he could not comment individual firms, but added: “I think you just look at our performance in terms of financial technology and the number of banks that have received approval.”
“Of course, any individual statement will discuss specific things, but I I think we have a very, very good track record.”
In recent weeks, the FCA has been embroiled in a row over banks closing customer accounts because of their political views.
The issue arose after Nigel Farage, a prominent Brexit supporter, said Coutts planned to close his accounts because his views were inconsistent with the bank's «values» and were inconsistent with its «position as an inclusive organization».
< p>Last week the FCA published the interim results of its review of so-called «debanking» after Chancellor Jeremy Hunt asked the regulator to look into the issue.
To the disappointment of Mr Farage, Conservative MPs and some government ministers, the FCA said it had found «no evidence» that customers were deprived of bank accounts because of their political views, but admitted it had not pursued Mr Farage's case at Coutts.
One government minister told The Telegraph that the report constitutes a «vindication».
The survey asked banks to provide data on account closures but did not ask for evidence from those who claim they were deprived of bank accounts.
Mr Rathi defended the report, stressing that the watchdog was committed to carrying out further work on the issue.
He said: “We have done what we promised, namely, they prepared an interim report. The Chancellor has asked us to provide an interim update by mid-September.
“At that time we outlined our plans to do this. And we have made it clear that this will be an interim period: we have five or six weeks to collect data from banks, and that after we publish it, we will have more work to do.
“To To be clear, the rules are clear that a bank or building society must not close a personal customer's bank account on the basis of legally expressed political views.»
Mr Rathi defended the FCA's debanking report after it was labeled a «whitewash». Photo: Eddie Mulholland
The FCA chief also says there were «clearly problems with what happened at Coutts» in relation to the botched closure of Farage's accounts.
The debanking scandal and the Coutts report on Mr. Farage has raised broader questions about the importance placed on diversity and inclusion initiatives in the city.
Promoting diversity and inclusion has been seen as a key goal of the FCA in recent years, with the regulator setting new targets for the representation of women and ethnic minorities on company boards and senior management teams.
Mr Rathi said: “I think that having a financial services industry… that is truly open to people of all backgrounds, all characteristics, able to develop, I think that will be very powerful for the competitiveness of the financial services industry.»
In fact, the consultation that the FCA will launch this week with the Bank of England's Prudential Regulation Authority (PRA) will go further on diversity and inclusion issues, setting new «minimum standards» that regulated companies must meet.< /p>
The proposals will require larger companies collect, report and disclose diversity and inclusion data; develop and implement a diversity and inclusion strategy; set goals to address underrepresentation; and recognize lack of diversity and inclusion as a non-financial risk.
Questions have also been raised about the FCA's links to controversial charity Stonewall, which has previously come under fire for its recommendations on transgender rights. Sheldon Mills, a senior executive at Watchdog, previously served as chairman of Stonewall's board of trustees.
Asked whether the FCA had become too close to Stonewall, Mr Rathi said: “No, I don't think so. All of these decisions were made by our HR team through the appropriate management channels.
“And we will always strive to do what is right for our colleagues and ensure we have a diverse and inclusive workforce so that we can achieve our goals as efficiently as possible. I am very proud of FCA's truly diverse team, both at the senior level and across the organization.»
More than halfway through his five-year term on the city's oversight board, Mr. Rathi said he had transformed the FCA into a more «proactive regulator» by «using data more effectively.»
He added that thanks to «significant market events» — Covid, Russia's invasion of Ukraine and the Tory leadership merry-go-round — the FCA has carried out «very deep and wide-ranging reforms» internally, particularly on pay, leaving staff numbers small. strike last year.
He refused to talk about his plans when his term came to an end. Andrew Bailey, his predecessor at the FCA, went on to become governor of the Bank of England.
When asked whether it is frustrating that the FCA appears to be under fire from all sides and often finds itself caught between rocks. and Anvil, a 44-year-old father of three, said: “The FCA has a really important role and we are balancing some very difficult considerations. We have very important powers.
“It is therefore appropriate that we are studied and challenged. And we're dealing with issues that are very important to individual consumers, firms and businesses.»
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