The FCA says it is increasingly discussing misconduct, including sexual harassment, with firms.

As part of a wide-reaching probe into sexual harassment, by the Parliamentary Women and Equalities Committee, the FCA’s executive director of supervision – investment, wholesale and specialists division, Megan Butler, wrote to the committee chair Maria Miller MP at the end of September.

Ms Miller’s report into sexual harassment in the workplace was published yesterday.

In the FCA’s contribution to the investigation Ms Butler wrote: “We view sexual harassment as misconduct which falls within the scope of our regulatory framework.

“Culture in financial services is widely accepted as a key root cause of the major conduct failings that have occurred within the industry in recent history, and we expect firms to foster healthy cultures which support the spirit of regulation in preventing harm to consumers and markets.

“A culture where sexual harassment is tolerated is not one which would encourage people to speak up and be heard, or to challenge decisions.

“Tolerance of this sort of misconduct would be a clear example of a driver of poor culture.

“It would be an obstacle to creating an environment where the best talent is retained, the best business choices are made and the best risk decisions are taken.”

The letter added: “Through our supervision of firms, we seek to ensure that they understand the importance of fostering a healthy culture.

“We do not only look at issues and their root causes when things go wrong, but consider how a firm’s culture is shaped by drivers such as incentives and remuneration, training, leadership, governance arrangements, purpose, and diversity and inclusion.”

She said the FCA’s Principles for Business were the “fundamental obligations we place on firms.”

The document stipulates that firms must inform the regulator promptly of “potentially serious misconduct involving their employees, including criminal convictions and other sanctions, upheld complaints, and disciplinary proceedings.”

Ms Butler concluded the letter by confirming that: “How firms handle poor personal misconduct, including allegations of sexual misconduct, is a topic which we are increasingly discussing with firms.”