The FCA and the PRA have published their long-awaited consultations which aim to formalise how firms approach diversity and inclusion.

By Sarah E. Fortt, Sarah Gadd, Nicola Higgs, Andrea Monks, Rob Moulton, Nell Perks, Becky Critchley, Charlie Bowden, Ella McGinn, and Charlotte Collins

On 25 September 2023, the FCA and the PRA published separate but related consultation papers on D&I in financial services (FCA CP23/20 and PRA CP18/23). The regulators published a joint Discussion Paper in July 2021 on how they might accelerate the pace of meaningful change in relation to D&I and misconduct in financial services, by establishing minimum standards and providing firms with a better understanding of regulatory expectations (see Latham’s related blog post).

While some of the regulators’ proposed measures overlap, others are separate, and so dual-regulated firms will need to read both papers carefully. Equally, some of the measures would apply to all firms, but the more granular requirements would apply only to larger firms. Firms will therefore need to ensure they understand which requirements would be relevant to them.

The specific outcomes the regulators hope to achieve are: (i) creating healthier firm cultures; (ii) reducing groupthink; (iii) unlocking new talent; and (iv) fostering a greater understanding of, and provision for, diverse consumer needs (which the FCA links to its recently introduced Consumer Duty).

This Client Alert discusses the proposals in the FCA and PRA consultation papers, what new requirements they would introduce for firms, and what firms should do now to prepare for the proposed requirements.