Non-financial misconduct: in Germany, "reliability" is key

Different jurisdictions control non-financial misconduct in financial services in different ways, as our multi-jurisdictional survey of this area illustrates.

One particularly contentious area is around when non-financial misconduct is at all relevant to the function of financial services regulators. You might ask this question a couple of different ways. When is (and isn't) non-financial misconduct relevant to the ability of an individual to perform their financial services role? Also, where non-financial misconduct isn't relevant to that ability, should it nevertheless attract sanctions by financial services regulators?

The answers to these questions in the UK, for example, are still fluid, though individuals have been banned from the industry, for example, for serious sexual offences but also for use of corporate mobile and email accounts for premium rate chat lines, sexually explicit messages and to discuss illegal drugs.

As various jurisdictions grapple with where to draw the (often blurry) lines, lessons might be learned from the first principles applied in Germany. There, what's key is "reliability" of an individual to perform activities that enjoy the public's special trust or are more exposed to the risk of criminal activity. Critically, the assessment is forward-looking rather than retrospective. It does not punish past conduct; instead, it anticipates possible future conduct. And personal circumstances are relevant only to the extent that they pertain to reliability in role - though this could include extra-occupational incidents including felonies and health issues.

Want to learn more? Listen to our podcast episode in which we expand on the above as well as answer questions around the sanctions that might be imposed, who the regulators can target, and how individuals might be held to account for failing to address the risk of non-financial misconduct occurring within their organisation. We also cover German whistleblowing protections including the current state of play on Germany’s implementation of the Whistleblowing Directive. Financial regulation counsel Sara Cody hosts the discussion with financial regulation partner Andreas Dehio and dispute resolution partner Christian Schmitt.

And at the above link you can also subscribe to our feed with your favourite podcast app for more episodes on non-financial misconduct and whistleblowing and a range of other subjects.