Lawyers shared consensus on the matter, as they told Investment Week it is the norm that FCA rules, once passed, cannot be applied retroactively.
‘Long-awaited’ reform of non-financial misconduct represents a ‘big shift’ for FCA
This is likely to mean that cases such as the one involving Crispin Odey will be subject to the rules applicable at the time, rather than the enhanced non-sexual misconduct ones, set to be introduced in 2024.
Alison McHaffie, financial services partner with law firm CMS, noted there is “no intention” for a retrospective aspect in the proposals and they will not “change the relevant underlying rules”, but they will provide greater clarity on the sort of behaviour that constitutes a breach of conduct rules or lead to a fitness and propriety
Molly Preleski, risk and regulation expert at PA Consulting, agreed, noting the FCA has “broad powers to assess fitness and propriety” as well as to take action against individuals breaching those conduct standards.
She added the rules set out in the consultation paper “can be seen as improved guidelines and specificity on the broad range of scenarios, which the FCA can consider when assessing fitness and propriety”.
Preleski continued: “This improved specificity is likely to make it easier for the FCA to take actions quickly against individuals, because it sets out explicitly that behaviour in private or personal life and outside of the regulatory system can be considered as a negative indicator of fitness and propriety, even where there is little risk of the behaviour impacting on the firm or financial system.”
FCA and PRA eye stricter rules for non-financial misconduct
While the proposed rules do not introduce “any new regulatory standards or expectations”, they are part of a “long overdue development”, which will provide clarity and assurance to firms in what can be a “challenging area to navigate”, said Sumitra Subramanian, principal associate professional support lawyer in the financial services disputes and investigations practice at Eversheds Sutherland.
Claire Cross, partner at Corker Binning and a former senior lawyer in the FCA’s enforcement division, agreed with Subramanian, adding that while the current guidance does not specifically state that sexual misconduct or similar behaviours are considered misconduct, “the FCA clearly considers it is a relevant factor that it can take into consideration when assessing whether an individual should be permitted to hold a controlled function”.
“This is particularly so in the case of senior managers who are expected to set a firm’s ‘tone from the top’,” she added.
CMS’ McHaffie also noted the future introduction of the rules could help the FCA “in dealing with challenges against their actions before the Tribunal, which has previously pushed back on how far thus type of misconduct is within the financial regulatory remit”.
