25 July 2019
Sexual harassment is now not only an important HR issue, it is an area of conduct risk and should be a boardroom priority.
2018 was the year of #MeToo, with growing focus on inappropriate conduct by individuals (particularly senior staff) and the response of companies when faced with such allegations.
Megan Butler (Executive Director, FCA) highlighted to the Women and Equalities Committee that: "sexual harassment and other forms of non-financial misconduct can amount to a breach of our Conduct Rules, which include the requirement to act with integrity, and the [Senior Managers and Certification Regime] imposes requirements on firms to notify us of Conduct Rule breaches".
As well as being relevant to an individual approved person's "competence, honesty, integrity and reputation", the FCA is clear it is also a firm issue: "the way firms handle non-financial misconduct, including allegations of sexual misconduct, is potentially relevant to our assessment of that firm, in the same way that their handling of insider dealing, market manipulation or any other misconduct is."
Firms need to consider the following:
The FCA has commented: "[t]olerance of this sort of misconduct would be a clear example of a driver of poor culture….". Boards and whistleblowing champions need to demonstrate clear leadership, making clear that harassment behaviours will not be tolerated and complaints will be rigorously investigated. Promoting a culture where complainants feel confident to come forward is the first key step.
2. Investigations processes
Harassment can be raised informally, formally as a grievance or via a whistleblowing hotline (sometimes anonymously). Firms need to assess policies for complaints and their investigation to ensure that incidents do not slip through the net and are dealt with consistently and fairly.
Managers need to be trained to identify reports that require escalation, and if in doubt, to seek guidance. In a regulated firm, it is not acceptable to consider that a suggestion of sexual harassment is someone else's problem. Organisations which overlook repeat sexual harassment incidents, wrongly characterising them as minor infractions, will face significant scrutiny.
Firms can learn from the experiences of past complainants. All parties to a complaint should feel supported through the process with a focus on appropriately managing expectations, to ensure that both the complainant and the accused understand the process, timing and any limitations (such as the ability to provide updates). Mismanagement can lead to lack of confidence in the process, regulatory exposure and civil claims.
3. Reporting obligations
The sexual harassment reported may also be a criminal offence. Firms should reconsider their policies around engagement with the police, including what to do if complainants do not wish to go to the police and the impact on the firm's own investigation. Firms then need to consider what conduct will be reported to the FCA, where it concerns senior managers or certified persons.
A wide group of internal stakeholders (business, HR, employment legal, whistleblowing, investigations and regulatory relations teams) should work through scenarios in advance, to determine the appropriate response, ensure consistency and implement the appropriate policies and escalation processes.
4. Settlement of claims
The use of confidentiality clauses, when sexual harassment allegations are settled, has been an area of regulatory, media and political focus. Firms may wish to review and monitor their use of such agreements, to ensure that the clauses remain appropriate, that the firm is taking a consistent approach and that they comply with the law (e.g. around protected disclosures).
Firms may not always be able to prevent sexual harassment occurring, but they can ensure a proper response. Firms and their boards that have grappled with the difficult, sensitive issues in advance are likely to be in a better position with respect to their (mis)handling of serious allegations.
This article first appeared in Insurance Day