What happened?
The Solicitors Regulation Authority (SRA) has ordered Benedict Foster, the former head of legal for debt and equity capital markets at BNP Paribas, to pay £31,000 following a hearing in the Solicitors Disciplinary Tribunal. During his tenure at BNP Paribas between December 2020 and September 2021, Foster was found to have regularly used offensive, inappropriate and sometimes racist nicknames in the office environment when referring to his colleagues. Examples included, "The Twittering Fool", "Pol Pot", "Jabba the Hutt" and questioning whether a colleague was "autistic".
At the Tribunal, Foster admitted to breaching several of the SRA's core principles, including the obligation to act with integrity and to promote equality, diversity, and inclusion. Consequently, he was fined £15,000 and ordered to pay costs amounting to £16,000. Although BNP Paribas conducted an internal disciplinary process following a complaint about Foster's conduct, the bank did not report him to the regulator until several months later, when his remarks were made public. This case follows another incident at BNP Paribas, where a female employee was awarded £2.1 million after being subjected to sexual discrimination, victimisation and unequal pay.
Will the FCA take similar action against financial services firms and professionals?
The outcome of the Foster case highlights the increasing scrutiny on non-financial misconduct (e.g. bullying, harassment and discrimination) and the SRA's decisive action against Foster underscores the importance of maintaining professional conduct and integrity in the workplace.
To date, the FCA has arguably lacked the appropriate framework to take decisive action for instances of non-financial misconduct, and has largely chosen to leave it to firms to deal with individual cases. Practitioners will be aware of many such cases, but of course they remain outside the public domain. However, in September 2023, the FCA published a consultation paper aiming to reform the treatment of cases of non-financial misconduct and proposed explicitly incorporating extended provisions related to non-financial misconduct into two key areas: (1) the Conduct Rules, which financial service providers and their employees must adhere to, and (2) the Fit and Proper assessment for senior managers and certified employees. Under the proposed new rules, instances of non-financial misconduct will more clearly lead to an individual being considered not fit and proper, and may result in the FCA seeking to withdraw approval and/or prohibit the individual. The proposed new rules should go some way to providing the FCA with the tools it needs to take decisive action.
By proposing to integrate non-financial misconduct into the Conduct Rules and the Fit and Proper assessment, the FCA is signalling a commitment to addressing workplace behaviour that falls short of professional standards, and it appears to be poised to adopt a more comprehensive approach to enforcement of this type of behaviour. However, despite the FCA's assurances in its consultation that this new approach would be "consistent with other regulators, for example, the SRA", it remains to be seen whether the FCA will indeed seek to intervene in these often highly sensitive and complex cases, or whether they will continue to rely on firms dealing with these matters in line with their own regulatory obligations.
Whatever the FCA's future approach, its proposed new rules have attracted considerable scrutiny, particularly around the lack of clarity on what constitutes prohibited non-financial misconduct, what steps managers should take to prevent such misconduct and how firms should go about assessing misconduct in employees' personal lives. Without further guidance, there is a real danger that the proposed new rules will fall short in tackling the non-financial misconduct which remains rife in some corners of the industry. The FCA's application of the final rules, expected in June this year, will be closely watched.