Watchdog holds back on diversity and inclusion proposals

The Financial Conduct Authority is pausing its proposals for diversity and inclusion (D&I) and will instead press ahead with moves to tackle non-financial misconduct.

In September 2023, the watchdog launched Consultation Paper CP23/20, Diversity and inclusion in the financial sector – working together to drive change. The proposals included requiring firms to develop D&I strategies, to collect, report and disclose diversity demographic data, and to set targets for tackling under-representation. 

There were also proposals to better integrate non-financial misconduct considerations into staff fitness and propriety assessments, conduct rules, and the suitability criteria for firms operating in the financial sector.

“We are prioritising our work on non-financial misconduct and being clearer that that constitutes an area where we may be able to take action,” chief executive Nikhil Rathi told the Commons Treasury Committee in May 2024.

He shared that there had been 257 responses to the broader data and diversity questions, saying: “We are not prioritising moving forward on that at this stage. We need to take the time to understand it.”

Legal firm Linklaters said that the approaching general election and Labour’s plans for ethnicity pay reporting may cut across some of the D&I proposals, and noted that firms that have already started planning for these “may now also want to pause and reflect”. 

It added: “But such work will not be wasted, as there continues to be an ongoing focus by many organisations and stakeholders to prioritise and improve diversity, equity and inclusion.”