Florence Brocklesby, the founder of employment and disputes specialists Bellevue Law, explains why private banks and wealth managers need to pay attention to the #MeToo movement, in culture and regulation.
Florence BrocklesbyFor the wealth management and private banking industries, the news on #MeToo is clear: it’s going to be increasingly front of mind and in the papers over coming months as cases rumble on, more historic issues emerge, and the FCA demands more of both regulated individuals and organisations.
Before we get to the regulatory issue, it’s worth remembering how things worked only two to three years ago when a #MeToo style incident arose. It’s quite common that it would have played out as follows: a woman reported an allegation of sexual misconduct; the allegations may have been investigated to a greater or lesser extent, but in many instances the complainant was asked, or felt obliged, to leave the organisation with a payment and having signed a non-disclosure agreement (NDA); meanwhile the more senior male employee remained in his role.
If we turn back to the present day, what’s clear is that what was once viewed as a private HR matter for organisations is now something that regulators have firmly in their sights.
A swathe of regulators has now made it clear that many #MeToo situations will be cause enough for individuals to fail the “fit and proper person” test. For private bankers and wealth managers, it’s essential to understand that the FCA treats non-financial conduct as relevant to assessing whether an individual is fit and proper, and has said in terms that sexual harassment as regulatory misconduct.
Many more regulated entities will be responsible for assessing their employees’ fitness and propriety, taking such issues into account, themselves after the extension of Senior Managers Certification Regime (SMCR) in December 2019. Additionally, the FCA has stated that it sees a link between poor culture and poor outcomes and will take a dim view of firms which tolerate sexual misconduct, noting that environments where employees feel they can speak up are less prone to poor decision making.
So, we have a set of circumstances where women feel newly empowered to do something about their allegations, and the regulator is willing to use its powers to ensure that matters are properly investigated, and perpetrators of sexual misconduct face severe consequences.
In this new environment, financial institutions which have not yet done so need to change two things: the underlying culture and the way they handle #MeToo type allegations.
The culture point is simple enough on paper. The FCA’s statement that it won’t tolerate firms who fail to deal with the link between poor culture and poor outcomes means offending firms look set to be sanctioned. The extension of the SMCR and its focus on personal accountability of senior managers makes this unavoidable.
However, in many cases it will be much harder in practice: even with the best will internally, leadership from within and a strong regulator and external environment pointing in the same direction, it’s going to take time and concerted effort to tackle some financial institutions’ embedded culture.
Turning to the second point, in combination with their leadership, HR teams need to take a lead on handling allegations of sexual misconduct better – both for the accuser and for the accused. The historical NDA strategy described above is not only discredited but simply no longer available: it only takes a brief look into the papers each day to see quite how much the tide has turned. In many cases, regulators will expect allegations of serious personal misconduct to be reported, so they cannot be swept under the carpet.
Equally, employers need to be mindful of their obligations to those who are accused of #MeToo incidents: these are increasingly known as Reverse MeToo. Such individuals are facing allegations which can have a life-changing impact on their personal and professional lives, and can sometimes be criminal in nature. When an allegation is made HR teams may feel that they are in the invidious position of needing to serve the accuser, the accused, the leadership team and the regulator.
Leadership teams at private banks would be well advised to take a long hard look at their approach to #MeToo allegations and their need for cultural change, before the FCA does.
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