How To Prevent Non-Financial Mis-Conduct

Introduction

Non-financial conduct is a term used by the regulator to describe the actions of an organisation or individual that do not directly impact their economic performance, but nevertheless have an impact on stakeholders. It can be divided right into two classifications:

1. The first category includes activities such as employee engagement, consumer satisfaction and distributor relationships.?
2. The second category associates with ecological concerns such as carbon emissions and also waste management.

Defining Non-Financial Conduct

Non-financial conduct is defined by the Financial Conduct Authority (FCA) as "the way firms treat their customers, including how they behave towards them, what they say and how they say it". It covers all aspects of customer communication from initial contact through to aftercare.

The UK regulatory framework has a clear focus on protecting customers from injury caused by unfair treatment or poor standards of service. The FCA's approach to non-financial conduct includes:

• Consumer protection - ensuring that consumers are treated fairly when dealing with regulated firms;
• Market integrity - preventing market abuse which could damage investor confidence in financial markets; and
• Market efficiency - promoting competition between firms so that consumers get better outcomes at lower prices

Types of Non-Financial Conduct

Non-financial conduct can be defined as including that an individual's conduct has breached the FCA's conduct rules and, for senior managers and certified persons, that their conduct has also adversely impacted their fitness and propriety. The FCA has long since regarded non-financial misconduct as potentially relevant to the integrity and reputation elements of a regulated individual’s fitness and propriety. While not formally defined, non-financial misconduct is generally regarded as encompassing activities such as non-financial indictable criminal offences, bullying, victimisation, harassment, discrimination and, broadly, any other non-financial-related conduct (whether in or out of the workplace) which calls into question or raises concerns about a firm’s intentions, culture or values or an employee’s integrity or reputation.

Guideline and Enforcement of Non-Financial Conduct

The FCA has a role in regulating non-financial conduct. It is responsible for promoting competition, protecting consumers and ensuring fair play in financial markets. The FCA can fine companies that break the rules up to 20 million pounds.

In addition to this, there are other regulatory authorities who manage different elements of non-financial conduct such as information protection or environmental regulation. These consist of:

• Information Commissioner's Office (ICO) - data protection
• Environment Agency - environmental law
• ESG Regulations

The Impact of Non-Financial Conduct

The impact of non-financial conduct is not limited to just financial losses. It can also cause reputational damage and consumer confidence, which can be even more costly than the initial loss.

The FCA's view is that non-financial misconduct goes to a firm's culture and poor culture has been a key root cause of major conduct failings in the industry. The FCA has been driving to improve the culture in the firms it regulates and across the financial services industry more widely. Although they recognise that culture change is challenging, it is a fundamental part of the FCA's wider ESG priority. Without a healthy firm culture, where individuals feel respected and valued, and inclusivity is truly promoted, the benefits of diversity will not be properly realised.?

Avoiding Non-Financial Conduct

Protecting against non-financial conduct can be accomplished through efficient internal controls and also compliance monitoring and internal reporting like whistleblowing.

Efficient Internal Control Measures

Inner controls are the plans, procedures and procedures that a company has in place to prevent or detect fraudulence. They need to be created to ensure that employees follow them constantly, which will assist you to avoid devoting any kind of non-financial transgression on your own. Some instances of internal controls include:

• Accounting policies - these set out how money is spent within your business so that it can be tracked properly;
• Staff training - this ensures staff know what they should do if something goes wrong;
• Risk assessments - these help identify potential risks within your business (for example theft);
• Compliance monitoring - this involves checking whether employees are following all relevant rules and regulations

You ought to additionally think about carrying out internal audits consistently - for example, annually - as part of your initiatives towards satisfying these requirements.

Ongoing monitoring is also key in helping businesses identify areas where improvements could be made in order to meet regulatory standards.

The Role of Expert Advisers.

There are a variety of experts that can aid you to browse the complicated world of non-financial conduct. These consist of:

• Financial Services Lawyers (for example, legal representatives).
• Financial advisors (for example, accountants).
• Compliance consultants (for example, experts).

If you need assistance with any aspect of regulatory compliance, call the experts, Compliance Consultant on 0800 689 0190 or email [email protected].