Number of FCA complaints about bosses ‘suspiciously’ low

A recent FOI has revealed a “suspiciously” low number of FCA complaints about senior leaders, writes Lucy McNulty, editor of Following the Rules podcast, in today’s Notebook

Snitches get stitches? ‘Suspiciously few’ FCA complaints concern senior leaders

More than 15,000 incidents of misconduct amongst finance workers were reported to the City regulator in the three years up to late 2024, according to a Freedom of Information (FOI) request. But just 96, or 0.6 per cent, of those reports related to City bosses’ poor behaviour.

That is “suspiciously few” and “concerning”, City veterans say.

Certainly, the UK’s senior managers’ and certification regime (SMCR) was designed to hold senior City workers more accountable for their conduct and competence.

It requires companies to tell the regulator if employees subject to the rules have faced disciplinary action for a breach of the regime’s standards of good behaviour. Those reported could then be banned from serving at regulated firms.

While most agree the SMCR has raised standards of behaviour within the City, only a handful of the City’s roughly 80,000 senior managers have faced enforcement action under the rules since their inception.

This reflects a regime which has improved standards and not required “a huge amount of very aggressive enforcement”, the FCA chief told the Following the Rules podcast . “We would only get involved if there is… very serious or persistent behaviour,” Nikhil Rathi said.

Moreover, the regime covers far fewer City bosses than City workers so fewer reports of misconduct relating to senior managers is expected.

Still, City veterans question the low numbers of senior level reports this FOI reveals.

As Britt Johnston, the EMEA head of conduct and culture at bank Natixis, told Following the Rules, if those subject to the rules don’t believe they are “ genuinely at risk ” of enforcement for poor behaviour the regime risks becoming ineffective.

Compliance chiefs tell me they’re concerned that companies’ disciplinary processes can encourage both deliberate and inadvertent underreporting of senior-level misconduct to the regulator, resulting in fewer enforcement actions. These FOI figures will fuel those concerns.

Chancellor Rachel Reeves has asked regulators to rethink the SMCR with a view to reducing its administrative burden. This has been welcomed, amidst a broader push towards more hands-off oversight.

Rathi wants a “more flexible” regime . But he has also said the FCA will have to rely on the “clear accountability” provided by the SMCR “to avoid putting lots of new rules in place” in its support of the government’s growth mission.

It’s imperative then that the FCA take steps to ensure its confidence in the regime is not misplaced.

New FOI unveils scale of City misconduct

The FCA received 4366 reports of breaches of the SMCR’s conduct rules in 2022, 5154 in 2023, and 5933 in 2024, according to an FOI request. Of those, 27 reports related to senior managers in 2022, 38 in 2023 and 31 in 2024.

The same FOI also revealed that there were 12 investigations opened in 2022 into potential SMCR breaches by senior managers, 11 were opened in 2023 and one in 2024. The FCA said in its FOI that there isn’t “a direct link” between breaches reported and an investigation opening.

Changing the world ‘not our role’ of investment managers

Chris Cummings, the CEO of the UK’s Investment Association, whose members manage £9.1 trillion for clients, pulled no punches in a recent interview with Following the Rules .

It’s time, he said, that the government and City regulators worked with the investment management sector to determine an appropriate and “common vision” for the sector’s future.

The sector is set to play a lead role in the government’s push to boost the UK’s economic growth and yet it is also battling what Cummings described as “costly red tape” and unrealistic expectations from lawmakers as to its role in society.

“Successive governments have called out investment managers to play a bigger role in social issues,” Cummings says. But changing the world is “not our role”, he says.

“More politicians have to understand the work of investment managers,” he says, adding that regulators could also better grasp “the benefits of having a thriving investment management industry in the UK”.

Of course, calls for clarity on the government’s “vision” for the City’s future are nothing new . So why are they not being answered? It’s time they were.

Quote of the week:

“It is the biggest risk facing society, frankly.”

Petra Hielkema, chair of the European Insurance and Occupational Pensions Authority, warns that governments and banks will struggle to pay for natural disasters.

What I’m reading:

Autocracy Inc. by Anne Applebaum

If you are looking for an uplifting read to ease you through the winter months, this isn’t it. Written by seasoned political journalist and historian Anne Applebaum, Autocracy Inc. is a brutal account of the pernicious forces undermining our democracies today and a well-researched summary of the methods these forces are employing. The book offers no easy solutions to stem this malignancy. As Applebaum’s frank reporting style makes clear, none exist. But, as the author also makes clear, that is no excuse to do nothing. This is a book that serves as a call to action for those complacent about the permanency of our democratic freedoms. It’s hard to put down and even harder to forget. Everyone should read this.