Lawyer Suggests Potential Unlawfulness of FCA Diversity Policies

Lawyer Raises Concerns Over Legality of FCA Diversity Policies

In a recent development, barrister Anna Loutfi has suggested that the diversity policies implemented by the Financial Conduct Authority (FCA) may be unlawful. This comes after equalities minister Kemi Badenoch stated that it is illegal to use positive discrimination and quotas in pursuit of diversity. Loutfi, who is the head of legal at The Bad Law Project, expressed her doubts about the lawfulness of the FCA’s diversity targets and believes that they may need to be tested.

Loutfi argues that while organizations may feel that their diversity policies align with the current cultural landscape, if they result in positive discrimination in practice, they become unlawful and can lead to racial segregation. She also expresses pessimism about the potential actions that can be taken against positive discrimination, as she believes that the law itself is under attack.

The FCA introduced diversity quotas to its reporting regime in 2022. Under these rules, listed companies are required to comply with a set of diversity targets or explain why they were not met in their annual financial report. The targets include having 40 percent of the board composed of women, including men who identify as women, and having at least one woman in key leadership positions. Additionally, at least one board member must be from a non-white minority ethnic background.

Although the “comply or explain” principle was designed to provide flexibility for companies facing specific circumstances, it has been criticized for becoming more of a “comply or else” approach. However, the Financial Reporting Council denies this claim and emphasizes that companies are encouraged to use the “explain” provision when full compliance is not possible.

In September 2021, the FCA faced further criticism for a parallel consultation it conducted alongside the Prudential Regulatory Authority (PRA), an arm of the Bank of England. The consultation proposed that larger companies and financial institutions set their own diversity targets and report on their progress. However, it also stated that positive discrimination is unlawful.

The independent Inclusion at Work Panel, tasked with reviewing diversity policies, recently published a report stating that diversity policies in organizations are rarely evidence-based and can often be counterproductive or even unlawful. The report cited employment tribunal rulings and an inquiry report that highlighted how well-intentioned efforts to boost diversity can lead to unjustifiable and unlawful positive discrimination.

Loutfi emphasizes that employment tribunal judgments may not be binding like High Court decisions, but they are currently the primary source of reference in discrimination cases. She argues that the Equality Act protects individuals regardless of their race, gender, or other protected characteristics. Loutfi cautions against assuming that race as a protected characteristic only refers to people of color or that sex as a protected characteristic only refers to women. Any policy that assumes this and justifies giving advantages to certain groups over others is discriminatory and goes against the Equality Act.

Loutfi raises concerns about the cultural assumptions surrounding diversity policies and warns against importing American historical issues into British society. She believes that if these discriminatory attitudes are accepted and allowed to continue, they will lead to racial segregation and division within society.

When asked about the potential legality of the FCA’s rules and proposals, Loutfi suggests that they could put companies in a position where they may be breaking the law. However, she also points to a deeper issue concerning the attack on the rule of law and the rise of cultural and political forces that seek to undermine equality. Loutfi believes that arguments based on the law may no longer hold weight in the face of global agendas that prioritize retribution, revolutionary change, and empowering certain groups over others.

Loutfi acknowledges that challenging policies in court may be the only recourse, but even successful challenges may not stop others from continuing with discriminatory practices. She highlights the shift away from the concept of citizenship and legal protection towards a focus on victimhood and ideology.

In conclusion, the concerns raised by barrister Anna Loutfi regarding the potential unlawfulness of the FCA’s diversity policies highlight the ongoing debate surrounding positive discrimination. Loutfi argues that these policies may lead to racial segregation and undermine the rule of law. However, she also acknowledges the challenges in addressing these issues within a society that prioritizes global agendas and ideological beliefs over legal considerations. As the debate continues, it remains to be seen how organizations and regulators will navigate the complexities of diversity policies while ensuring compliance with the law.