Diversity & Inclusion: An update following the FCA’s announcement

In this article, Michael Sacks, Director of Learning & Development, shares valuable insights following the FCA’s recent letter regarding its diversity and inclusion proposals.

CP23/20 contained a number of proposals aimed at supporting diversity and inclusion within the financial services industry.

Some of these – for example, those relating to data collection, reporting and disclosure – attracted much publicity and interest. When Nikhil Rathi, Chief Executive of the FCA, appeared before the House of Commons Treasury Committee in May 2024, the Committee commented that, “too much emphasis on a data-gathering exercise would end up being tick box rather than actual cultural change.”  

In response to this, Mr Rathi confirmed that, “on the broader data and diversity questions…we are not prioritising moving forward on that at this stage.”

Consequently, the FCA’s announcement on 12 March 2025 that it does not intend to publish new rules on diversity and inclusion was not surprising.

However, it is important not to lose sight of the fact that, whilst these proposals were one strand of CP23/20, they were not the only element. In particular, the consultation also included important proposals in relation to non-financial misconduct.

The FCA confirmed (both to the Treasury Committee in May 2024 and in its March 2025 announcement) that it planned to take forward its work on non-financial misconduct. This is designed to clarify the application of the Conduct Rules and the fitness and propriety regime to conduct such as bullying, sexual harassment and discrimination.

The FCA expects to set out next steps by the end of June 2025.

This work is significant as the Conduct Rules and the fitness and propriety regime are both key levers within the Senior Managers and Certification Regime (SMCR) that are used by the FCA to drive healthy cultures within regulated firms.

The FCA has long held the view that non-financial misconduct is covered by the SMCR, and that tackling it can help improve outcomes for markets and consumers. These proposals are therefore important, and their potential impact should not be underestimated.

Michael Sacks started his career as a lawyer, advising on UK and international regulation. In 2005, he set up a global compliance training provider which developed online and classroom training for major financial groups, regulators and multi-national companies. As one of the lead subject matter experts, he delivered compliance training on a wide range of regulatory topics, including financial crime, market conduct, information security and conduct risk.

Michael has worked with regulators and industry bodies, including the FSA (now FCA), the JMLSG and the BSR/UN Global Compact, to develop training and awareness initiatives in relation to major legal and regulatory events. He is also the author of ‘Financial Services Regulation - A Practical Guide’ which was endorsed by Sir Callum McCarthy, former Chairman of the FSA.