No More Sexism in the City: Why Employers Face a New Era of Accountability

Towards the end of last year, the FCA provided an update on its response to the Treasury Committee’s 2024 Sexism in the City inquiry. The FCA’s letter of 16 October 2025 is more than a progress report, it is a clear signal of where workplace regulation is heading. The regulator’s message is clear: culture, conduct and prevention of harm are now core regulatory priorities, not just peripheral HR issues.

This shift aligns with a broader transformation in employment law. Since October 2024, employers have been under a statutory duty to take reasonable steps to prevent sexual harassment of their employees in the course of their employment (including by third parties. From October 2026, the Employment Rights Act 2025 (“ERA”) will strengthen that duty further, raising the standard to “all reasonable steps”, as well as making employers liable for third party harassment.

Taken together, the FCA’s cultural expectations and the ERA reforms mark a decisive move towards proactive, preventative governance. Employers are entering a new era of accountability, and those who act early will be best placed to meet the rising standard.

The FCA’s Update: Culture as a Regulatory Priority

The FCA’s response to the Sexism in the City inquiry highlights several strands of work that collectively demonstrate a tightening regulatory stance:

• Follow up with outlier firms from the FCA’s culture and non financial misconduct (“NFM”) survey, prompting improvements in reporting, governance oversight, training and policies.
• Supervisory work across wholesale brokers to test whether firms have effective preventative and detective controls for misconduct.
• Active casework, with 76 open NFM related supervisory cases and one enforcement case.
• Cross regulator engagement on issues such as the bonus cap review and cultural risk.
• Potential further guidance on NFM rules, which will extend to non bank firms from September 2026.

The FCA’s stance is clear: non financial misconduct is a regulatory risk. Firms must be able to demonstrate that they understand their cultural risks and are taking active steps to prevent harm. This regulatory direction mirrors, and reinforces, the changes coming under the ERA.

The Legal Direction of Travel: A Preventative Duty That is Becoming More Demanding

The preventative duty is not about creating a workplace that is entirely “risk free”. Instead, the law requires employers to take a step back and critically assess their culture: gender balance, power dynamics, leadership behaviour (including at social events), exposure to third party risks, and the effectiveness of complaints processes. The question is: are we doing all that we reasonably can to protect our employees? This is a continuous assessment process.

From October 2026, the ERA will sharpen this duty in two key ways:

1. A higher standard: “all reasonable steps”

The ERA strengthens the existing duty by requiring employers to take all reasonable steps to prevent sexual harassment of their employees in the course of their employment. This aligns the duty with the Equality Act’s statutory defence and raises the evidential bar for employers.

2. Standalone third party harassment claims

The ERA introduces employer liability for third party harassment, unless the employer has taken all reasonable steps to prevent it. This applies to all forms of harassment, not just sexual harassment.

This raises concern for employers where third-party engagement is critical, whether that be clients of an insurance firm or customers of a retail shop. A review of policies, training, and incident response processes will be critical to complying with this new framework.

A Converging Landscape: Regulation and Legislation Are Moving in the Same Direction

What is striking is how closely the FCA’s cultural expectations and the ERA reforms align. Both frameworks:

• prioritise prevention over reaction
• expect leadership engagement and accountability
• require robust reporting and early intervention
• emphasise continuous cultural assessment

The Sexism in the City inquiry exposed systemic cultural issues: power imbalances, weak reporting channels, and inconsistent leadership behaviours. The FCA’s response has been to intensify its scrutiny of culture and misconduct controls. The ERA reforms are the legislative counterpart to this shift.

For employers, the message is clear: cultural risk is legal risk, and legal risk is regulatory risk.

What Should Employers Do Now?

Forward thinking employers are already preparing by:

• Reviewing and updating anti harassment and conduct policies
• Assessing cultural and behavioural risks, particularly in high pressure or male dominated environments
• Training managers and staff on recognising, preventing and responding to misconduct
• Strengthening reporting channels and ensuring psychological safety
• Documenting all preventative steps - essential evidence under both the ERA and FCA scrutiny.

This is not simply about compliance. It is about building workplaces that meet the expectations of regulators, legislators, employees and the public.

How We Support Clients: Leading the Way on Prevention and Culture

Doyle Clayton is at the forefront of these developments. We deliver practical, engaging training, alongside reviews and redrafts of policies, which help employers meet both regulatory expectations and the strengthened statutory duty. We can offer:

• Sexual harassment prevention training
• Manager focused sessions
• Policy and procedure reviews
• Risk assessments and advice