The Sexism in the City report highlights key issues affecting women in financial services and sets out a number of recommendations to address them.

By Nell Perks, Ella McGinn, and Charlotte Collins

On 8 March 2024, the House of Commons Treasury Committee published its report from the Sexism in the City inquiry, which sought to explore progress in four key areas affecting women in financial services since the Committee’s Women in Finance report was published in 2018. Overall

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.

By David Berman, Sarah Gadd, Nicola Higgs, Rob Moulton, Becky Critchley, and Nell Perks

The FCA’s latest report into D&I highlights the need for additional metrics, social mobility, firm culture, staff development, data quality, and systematic strategies.

In 2021 and 2022, the FCA carried out a survey of firms in respect of their approach to diversity and inclusion. In advance of a full consultation on new rule proposals in 2023, the FCA has provided a progress update. Overall, the FCA remains concerned about the lack of progress in the industry and has highlighted a number of key points that it encourages regulated firms to consider and use.

Monitoring the progress of the Financial Services and Markets Bill and regulatory divergence between the UK and the EU will continue as a key theme in 2023. 

The Financial Services and Markets Bill leaves a significant amount of the essential regulatory detail to be developed later by HM Treasury (through regulations), followed by development of the specific rules by the regulators. Therefore, firms operating in the financial services sector will face legal and regulatory uncertainty as to the UK’s regime

The Financial Services Skills Commission has issued an insight paper outlining how companies can collect and evaluate data on employees’ socioeconomic backgrounds.

By David Berman, Nicola Higgs, Rob Moulton, and Dianne Bell

Socioeconomic backgrounds of employees and socioeconomic diversity at senior levels across the UK financial services industry is beginning to feature more prominently in diversity and inclusion (D&I) discussions. Several government and industry taskforces and studies conducted on the issue of social mobility and class advantages/disadvantages have revealed striking impacts of this bias within the UK financial services sector. Not only is the sector significantly reliant on individuals from higher socioeconomic backgrounds at the leadership level, but the studies also indicate that employees from working class or lower socioeconomic backgrounds are held back in a number of ways (which may lead to their eventual departure from the sector).

  • Progression gap: Employees from working class or lower socioeconomic backgrounds progress 25% slower than peers despite no difference in job performance, and they find conforming to the dominant cultures “exhausting” and this impacts on their individual performances.
  • Pay gap: A class pay gap of £17,500 appears to exist in financial services (compared with £5,000 in the technology sector).
  • Opportunities to upskill talent: Findings suggest that individuals from lower socioeconomic backgrounds are less likely to sign up for training opportunities.

From a regulatory perspective, this lack of diversity at the senior level impacts the culture of a firm, raising concerns around, for example, groupthink and its impacts on effective decision-making.

The new rules provide issuers with flexibility to report on representation of women by reference to either gender identity or sex.

By Chris Horton, James Inness, Anna Ngo, Nicola Higgs, David Berman, Rob Moulton, and Johannes Poon

On 20 April 2022, the FCA published its final policy decision on the proposals set out in CP 21/24 “Diversity and inclusion on company boards and executive committees”.

New diversity reporting requirements

The updated Listing Rules require in-scope issuers (broadly, premium or standard listed companies, excluding OEICs and “shell companies”) to incorporate into their annual reports certain disclosures on the diversity of their boards and executive management, including:

  • A “comply or explain” statement setting out whether they have met the following diversity targets:
    • At least 40% of the board are women
    • At least one of the senior board positions is held by a woman (Chair, CEO, Senior Independent Director, or CFO)
    • At least one member of the board is from a minority ethnic background (defined by reference to categories recommended by the Office for National Statistics (ONS), excluding those the ONS lists as coming from a White ethnic background)
  • Numerical data on the sex or gender identity and ethnic diversity of their board, senior board positions, and executive management in a standardised table (with issuers able to add to the fields “men” and “women” to include “non-binary” or other gender identities)

This annual publication outlines some of the primary focus areas in 2022 for UK-regulated financial services firms. There has been a marked shift away from dealing with immediate post-Brexit priorities to more fundamental consideration of the direction of travel of UK financial services regulation, and this is borne out across many of the topics covered in this year’s publication.

While monitoring regulatory divergence between the UK and the EU will be a key theme for 2022, other familiar topics will

Proposals reflect growing investor focus on the ESG performance of listed companies.

By Chris Horton, James Inness, Rob Moulton, Anna Ngo, and Johannes Poon

The UK Financial Conduct Authority (FCA) has launched a consultation setting out proposed changes to its Listing Rules (LRs) and Disclosure Guidance and Transparency Rules (DTRs). The proposals seek to: (i) increase transparency for investors on the diversity of listed company boards and executive management; and (ii) improve considerations of broader diversity aspects within diversity policies and related disclosures by listed companies.

The consultation opened on 28 July 2021 and will close on 20 October 2021. Subject to consultation feedback and FCA Board approval, the FCA will seek to finalise the relevant rules by late 2021.