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Diversity in Regulated Business: What do the long-awaited updates mean for leaders?

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Diversity in Regulated Business: What do the long-awaited updates mean for leaders?

​Is the financial services space on the precipice of a paradigm shift? On September 25th, 2023, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) published consultation papers aimed at bolstering the sector’s diversity and inclusion efforts.  

The FCA’s consultation paper, CP23/20, intends to provide leaders with a more comprehensive set of guidelines, frameworks, and expectations regarding D&I. The proposed rule changes would shift attention to better encompass the wider D&I strategy (as opposed to a policy-oriented focus).

The PRA has published a separate proposal, CP18/23, which will apply to any PRA-regulated organisation. The PRA and FCA collaborated closely to ensure that the proposals are cohesive for dual-regulated firms.  

Through the proposed rule changes, responsibility is set to increase at the senior leadership level, perhaps signifying the start of a new era of accountability. At the very least, the changes will supply firms with a greater understanding of what’s required of their D&I efforts in a regulatory capacity.  

Key Takeaways from the Proposals 

The majority of the FCA’s proposed changes are set to affect larger firms (with more stringent requirements placed on those with over 250 employees), although the minimum standards set out in the CP23/20 will apply to any organisation with Part 4A FSMA permission.  

The changes are also set to apply to any size firm that falls under the Capital Regulation Requirements or the Solvency II Directive. Limited Scope SM & CR firms are excluded.  

Some of the key takeaways from the CP23/20 include: 

  • Expanded guidance on the definition (and integration) of ‘Non-financial misconduct,’ assessments, an area that many have found vague or confusing since they were introduced back in 2018. The CP23/20 seeks to expand the criteria of NFM in greater detail, a move that some worry will enhance the burden of compliance on regulated employers. The non-financial misconduct guidance will apply to all regulated firms.  

  • The FCA has proposed a new set of minimum requirements for D&I reporting. These changes are predominantly focused on improving transparency and accountability at the strategic level. Under the new rules, firms will need to show their self-set D&I goals, the measures they have in place for reaching them, and any barriers that might stand in the way. Additionally, firms will be required to report their internal diversity data (covering age, gender, religion, disability and ethnicity). The FCA note the potential difficulty of obtaining this data, appreciating the emergence of incomplete datasets as a result. 

  • The proposals require firms to set targets that address representation throughout the organisation, from the board through to the broader employee population. There is some concern that target-setting under the new reporting criteria will prove extremely challenging – particularly given the difficulty associated with obtaining sensitive data in the current climate. 

The PRA’s CP18/23 

The PRA’s proposals are well-aligned with the FCA’s, having been developed in parallel with one another. Still, firms that are regulated by the FCA and the PRA are advised to familiarise themselves with both sets of proposals. 

The major difference is in which organisations the proposals apply to – the CP18/23 applies to banks, building societies, and UK investment firms operating inside the scope of the PRA.  

The PRA also expects firms to develop their D&I strategies in light of their core business values and their company culture.   


The proposed changes represent a great deal of promise for the D&I space, spotlighting the regulators’ commitment to driving positive cultural transformation. For all the good intent, the proposals may warrant concern over several key risk and compliance challenges.  

Developing the infrastructure required to support the increased rate of data collection and strategy reporting must be considered well in advance of the changes (the proposals are open for consultation until December 18th, anticipated to come into force 12 months after their publication).  

A lack of data privacy is amongst the top concerns for both consumers and organisations in today’s digital landscape – managing consumer (and regulatory) expectations in a world of changing rules requires a highly skilled, agile workforce.  

Firms will need to revisit their recruitment processes to ensure that they’re creating equitable access to opportunities, mitigating unconscious bias, and expanding the talent pool.  

Support from Broadgate 

It can be tough to know where to start, but thankfully, there’s more than enough time to prepare yourself for the coming changes. Broadgate’s consulting division, Trinnovo Consulting, can equip you with the means to navigate change and transformation.

Whether that’s through leadership training, unconscious bias training, culture captures, inclusion workshops, strategy support, benchmarking or more, we can build a bespoke service that appeals to the unique needs of your business.  

To find out more about our community-led recruitment methodology, our diversity, inclusion, equity and belonging consultancy services, or how we can help you embed lasting, meaningful change into your business, get in touch: