How does the FCA expect a firm to go about investigating allegations of NFM? If someone’s non-financial misconduct breaches the Conduct Rules, does that mean they need to be dismissed?
These questions arise frequently in the HR and Compliance departments of FCA and PRA regulated businesses. Perhaps that is because, despite clearly articulating its expectations that regulated firms rid themselves of bad apples, the FCA has avoided commenting on how they should go about doing so.
That may be wise. After all, it would be an Employment Tribunal, not the regulators, which would determine whether an employer carried out a ‘reasonable’ investigation and whether a decision to dismiss falls within the band of reasonable responses. If the regulators were to require investigations to be conducted in a certain way, that would either ‘gold plate’ or cut across a firm’s legal obligations. Whilst the band of reasonable responses might seem like a rather nebulous concept, it has been the subject of detailed scrutiny in decades of Employment Tribunal decisions and, in most cases, it is now reasonably clear where its boundaries lie. The same cannot be said of the types of non-financial misconduct that will/will not breach the Conduct Rules. The proposed new rules around NFM do not (as they stand) affect ordinary unfair dismissal law at all, nor do they require in terms that an employer must dismiss an employee who commits particularly serious breaches of those Rules. They don’t need to. Once the employer has concluded that the conduct in question makes the employee not fit and proper, it has no option but to stop the employee performing any regulated role, and so in most cases will be obliged to dismiss on that basis.
So, from an employment lawyer’s perspective, the absence of regulation on these matters is welcome. However, that does not answer the question about whether and how the FCA involving itself more expressly in NFM affects how employers should go about investigating it and what the appropriate sanction might be.