The FCA receives a whistleblowing complaint about sexual misconduct within financial services every month, the regulator's chief executive Nikhil Rathi told MPs yesterday.
Speaking to the Treasury Select Committee, Rathi was asked to clarify the regulator's stance on "non-financial" misconduct within the world of banking, asset management and insurance, following serious allegations of sexual assault against hedge fund manager Crispin Odey last month.
Odey declined to comment on the watchdog's ongoing probe into Odey, but told MPs his FCA colleagues received whistleblowing reports of sexual misconduct "three times a quarter".
"We have to prove the misconduct in question impairs the objectives [we set for supervised persons or firms]," he said of the FCA's work in such cases.
"That has to be proven, ultimately, because often these are contentious cases, in a court. And the case law on this is mixed. It's an evolving and sensitive area, it's tricky terrain, but I would not want this committee to have any doubt about our resolve to be proactive in taking on these types of complicated cases."
Rathi was then quizzed on a 2021 Upper Tribunal case where the FCA had sought to prevent a former financial adviser, Jon Frensham, from practising in financial services. Frensham had been convicted of grooming a child.
Though the FCA argued at the time the offence displayed both a lack of personal integrity and the abuse of a position of trust, the Tribunal cited a lack of evidence the offence would prompt further exploitation of clients in a financial services setting.
Asked whether he needed more firepower from government to be able to act more decisively in such cases, Rathi said the case law was "mixed."
"We are still taking on cases on the basis that non-financial misconduct can be relevant to fitness and propriety. As I said in my letter, it's always a matter for government and parliament," he said.
"If you wished to be more specific about the nature of the serious offences which you think should prevent an individual from operating in a regulated sector – and it may not be financial services by the way, there's other regulated sectors in the economy as well – that would obviously provide important guidance to the courts. What we have to prove, is the specific non-financial misconduct means the individual is not fit and proper to make a specific financial services activity they are seeking to do."
The FCA has so far taken action in seven cases of non-financial misconduct. Regarding sexual misconduct, it is expected to add further clarity regarding its expectations in a joint paper on diversity and inclusion with the Bank of England in September this year.
