City firms race to prepare for FCA crackdown on bullying and harassment

City's largest hedge funds, insurers and pension firms are preparing for new rules that will require them to report instances of non-financial misconduct to the Financial Conduct Authority (FCA). From September, the FCA will expand its crackdown on bad behaviour in the banking industry to cover a broader range of City investment firms and brokers.

Under the new rules, companies will need to report serious cases of non-financial misconduct, including racism, sexual harassment, violence and intimidation, to the regulator. They will also be required to share such reports with potential future employers of managers implicated in misconduct. The FCA hopes that these measures will prevent so-called "rolling bad apples", where rogue bosses move to new firms without facing consequences.

Experts say that firms are rushing to train staff and wrap up internal investigations before the rules take effect in September. Jill Lorimer, a partner at the law firm Kingsley Napley, said that firms are brushing up their policies and procedures and ensuring thorough training. The FCA is particularly keen to target firms dealing with allegations against their people before the new regime begins.

The new rules will apply to any company bound by the FCA's senior managers and certification regime, which holds top bosses accountable for wrongdoing. The move comes despite complaints from some City firms and politicians about red tape hindering investment, jobs and growth in Britain. However, recent misconduct cases, such as those involving Lloyd's of London and Barclays, have bolstered the argument that cleaning up the financial sector could create a competitive advantage.

The FCA is also pursuing a legal battle with hedge fund boss Crispin Odey over allegations of sexual harassment, which Odey denies.