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Sexism in the City Inquiry


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On 8 March 2024, International Women’s Day, the Treasury Committee published its final report on its Inquiry into Sexism in the City (the Inquiry), which was launched last year with a call for evidence. Alongside the report, it issued some hard-hitting recommendations, and deplored the minimal progress made since the last Committee reported on its inquiry into Women in Finance in 2018. It called for an end to the “era of impunity” for sexual harassment and bullying.

The headline recommendations included the banning of non-disclosure agreements (NDAs) in sexual harassment cases, a ban on prospective employers asking for salary history, and reducing the gender pay gap reporting threshold from 250 employees to 50.

As the report criticised the proposals by the FCA and PRA to require the publication of diversity data contained in their consultation last year on improving diversity, equity and inclusion in financial services firms, the FCA also published a statement responding to the report.


The Sexism in the City Inquiry was launched by the Treasury Committee (the Committee) in July 2023 with a Call for Evidence. They were particularly interested in:

  • progress made in removing barriers to women entering and progressing their careers across the financial services industry, including board and executive roles;
  • the impact of the Treasury’s “Women in Finance Charter” and other initiatives;
  • the progress on removing gender pay gaps in financial services; the role of the Government and financial regulators in ensuring firm cultures, policies and practices support women’s aspirations and progress; and
  • the role of firms, Government and financial regulators in combatting sexual harassment and misogyny in financial services, and offering effective ways to escalate concerns about sexual harassment.

The Committee had previously investigated this issue, and in its report published in 2018 made a number of recommendations, including that bonuses should be assessed against clear criteria to abolish “alpha-male” culture, and encouraging firms to publish strategies for closing gender pay gaps. Its report highlighted the underrepresentation of women in senior positions and the large difference in average pay between men and women in the sector. It identified various barriers faced by women which contributed to this pay disparity, including poor workplace cultures and unconscious bias. One of the aims of this Inquiry was to look at the progress made following recommendations made in 2018.

What did the Treasury Committee do?

When launching the Inquiry, the Committee issued a very wide call for evidence, encouraging stakeholders to submit evidence on whatever they chose, rather than in response to a set of questions. The Committee also considered oral and written evidence from government and regulators, firms, the Women in Finance champion, trade associations, and held a roundtable for women who worked in finance.

What are the Regulators doing in this area?

In September 2023, the FCA and PRA (the Regulators) published consultations, proposing a new regulatory framework on diversity and inclusion in the financial services sector. Among other things, they will require firms over a certain size to collect and report on diversity data. The Regulators are also proposing that any adverse findings relating to bullying, sexual harassment and discrimination will be more directly linked to the “fit and proper” test in their rules, which set minimum standards for those who fulfil certain roles in financial services firms.

It is intended that the proposals will start coming into force 12 months after the publication of the policy statements, which are due to be published later this year.

We covered these proposals in our article, “FCA and PRA consult on proposals to increase diversity and inclusion in financial services”.

During the course of the Inquiry, the Regulators were asked to provide more detail on their proposals. In January 2024 Sarah Pritchard, Executive Director of Markets and International at the FCA, told the Committee during her oral evidence that the FCA were commencing a survey of wholesale banks and wholesale insurers, looking at numbers and statistics of non-financial misconduct cases, including methods of resolution.

In February 2024 the FCA published a statutory request for information to Lloyd’s managing agents and intermediaries, asking for this data. The FCA intends to use the data to take stock and share best practice, and also to inform their supervisory programme once the new rules come into force.

The Committee’s report and recommendations

The Committee noted that its evidence indicated that disappointingly little had changed since 2018 – firms were still treating diversity and inclusion as a “tick-box” exercise rather than a core business priority, there had only been a small reduction in the gender pay gap, and there had only been an incremental improvement in the proportion of women holding senior roles in financial services firms. One of the recommendations made by the Committee is that the government should legislate to ban asking applicants for salary history, which can perpetuate pay inequalities.

The Committee was also shocked to hear that cases of sexual harassment and bullying were still prevalent in the sector, and the way in which these were handled by firms. They were concerned by the wide use of NDAs which they considered were being used to silence victims. They are therefore recommending that the government ban their use in such cases.

The Committee also noted that neither of the Government’s flagship initiatives on gender equality, the gender pay gap reporting requirements and HM Treasury’s Women in Finance Charter, had brought about the extent of change that had been anticipated, other than increasing transparency. One of the Committee’s recommendations is that the Charter should be enhanced, including that its focus should be extended beyond the top level of senior management.

The Committee recommended that the Regulators should increase the visibility of its whistleblowing line, including making it clear that the existence of an NDA did not prevent someone from reporting misconduct to the FCA.

As noted above, the Committee reviewed the Regulators’ proposals for improving diversity and inclusion, and questioned them extensively on them. The Committee remained unconvinced that the data reporting would achieve the required cultural change, and considered that they would merely add a costly burden to firms. They also noted that the data reporting did not apply to smaller firms, which the Committee believed might have worse cultures. They therefore recommended that the Regulators drop their plans for data reporting and target setting, and instead focus on ensuring that senior leadership of firms took more responsibility for improving diversity and inclusion. In a statement, the FCA promised to consider these recommendations carefully as part of its consideration of all of the responses to its consultation.

Employment implications and next steps

Employment implications for firms

The report findings serve as a stark reminder of the overwhelming need for financial services firms to shake things up and drive cultural change. For far too long, many financial services firms have taken the path of least resistance and failed, either purposely or by turning a blind eye, to root out non-financial misconduct in the workplace.

In addition to the powerful moral and business case to tackle non-financial misconduct, firms must also bear in mind the legal, regulatory and reputational implications of failing to deal with such misconduct appropriately, which can result in bullying and discrimination claims and reports to the FCA. It is not enough to wait to take reactionary steps once a report of bullying and/or discrimination has been made, noting that so many cases remain unreported across the sector. Rather, as the report makes clear, firms “need to embed a zero-tolerance culture towards harassment and bullying in the workplace”. In the specific case of sexual harassment, the legal risk for firms is compounded by the introduction of the Worker Protection (Amendment of Equality Act 2010) Act, which is due to come into force in October this year and will impose a proactive duty on employers to take “reasonable steps” to prevent sexual harassment of employees. A failure to take “reasonable steps” may result in an uplift on compensation awarded in a sexual harassment claim of up to 25 per cent.

For firms to be able to instil cultural change from the top-down and combat against the wide-ranging legal, regulatory and reputational risks associated with ignoring and/or failing to prevent non-financial misconduct, they should:

  • Conduct workplace reviews and risk assessments to proactively identify problem areas.
  • Regularly review and update bullying and harassment and other equality, diversity and inclusion policies, to ensure they are tailored to the firm’s needs and directly address the risks identified in reviews or risk assessments, with clear reporting procedures in place.
  • Provide training on relevant policies, including regular refresher sessions and bespoke training for managers and bystanders/”first responders” to harassment complaints.
  • Take complaints seriously and investigate them thoroughly, showing their workforce that bad behaviour will be called out, no matter whose reputation is at risk; including considering whether it is appropriate to appoint an external, independent investigator to investigate any complaints raised, to ensure impartiality.
  • Implement procedural safeguards in respect of investigations into complaints made, including:

    • taking a zero-tolerance approach against and protecting complainants from retaliation, ensuring that the subject(s) of any such complaint and witnesses are reminded throughout the investigation and upon conclusion that they must not retaliate against the complainant, or else face potential disciplinary action in respect of the same;
    • offering enhanced and individualised wellbeing support for all parties involved in any such investigation; and
    • reminding complainants that any instruction to keep the investigation confidential does not prevent them from making requisite disclosures; for example, to regulators, the police or for the purpose of making a protected disclosure in accordance with whistleblowing legislation.

  • Appoint members of senior management to act as champions, who will lead from the top and maintain oversight and accountability for progress made (or lack thereof) in respect of improving culture.
  • Set up network support groups, to operate as a safe space for employees to voice their concerns, and encourage such groups to feed back to senior management on specific problem areas they have identified and discussed.

Implications for senior executives

Given the fact that little has changed since 2018, the report will, undoubtedly, make for depressing reading for senior executives within financial services who have experienced, either firsthand or as a bystander, bullying and harassment in the workplace, and/or those who have found themselves subjected to significant and repeated pay or other form of gender inequality. The sad reality is that many senior executives will consider it futile to raise concerns, insofar as they may perceive the odds to be stacked against them in terms of being believed and treated fairly. It is only if, and when, financial service firms take the proactive steps described above to reshape their culture, that their employees will feel empowered to raise and pursue such concerns.

However, it will hopefully be of some reassurance that this is now an active area of interest for the Regulators and the Government. Whilst some of the Committee’s recommendations are easily implemented, it remains to be seen whether the Government will, for example, act upon the Committee’s more radical recommendation to introduce legislation to ban the use of NDAs in harassment cases. Whilst NDAs, and the way in which they have been inappropriately drafted and used in high-profile cases of harassment, have been extensively scrutinised and criticised in recent years, an outright ban of NDAs would indicate a significant departure from the status quo and, to some, would seem to cut across the commercial value for both parties in achieving a clean break following a dispute. In the meantime, financial services firms must adhere to what is recognised as standard practice now, making it expressly clear to complainants that nothing in an NDA prevents them from making protected disclosures and/or reporting harassment to regulators, law enforcement bodies and cooperating with any related investigations (in addition to a long list of additional carve outs in respect of disclosures which departing employees are permitted to make).

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, March 2024

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About the authors

Pooja Dasgupta Lawyer Photo

Pooja Dasgupta

Senior Associate

Pooja is a specialist employment and partnership lawyer, advising senior executives, LLP members and employers on contentious and non-contentious matters, with particular experience of acting for clients within the professional services and financial services sectors.

Pooja is a specialist employment and partnership lawyer, advising senior executives, LLP members and employers on contentious and non-contentious matters, with particular experience of acting for clients within the professional services and financial services sectors.

Email Pooja +44 (0)20 3375 7825

Nina Caplin

Knowledge Lawyer

Nina is a knowledge lawyer in the Banking and Financial Services team. She supports the Financial Services team, keeping them up to speed with the latest regulatory developments and providing them with the resources required to undertake client work efficiently and accurately. She trains the lawyers in new law and practice, answers legal queries, and assists with knowledge sharing and resources across the firm’s practice group.

Nina is a knowledge lawyer in the Banking and Financial Services team. She supports the Financial Services team, keeping them up to speed with the latest regulatory developments and providing them with the resources required to undertake client work efficiently and accurately. She trains the lawyers in new law and practice, answers legal queries, and assists with knowledge sharing and resources across the firm’s practice group.

Email Nina
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