What is changing?
The Financial Conduct Authority (FCA) is bringing non-financial misconduct (NFM) unambiguously into the scope of the Conduct Rules for non-banks, aligning them with banks, amending its Code of Conduct sourcebook (COCON) with effect from 1 September 2026. For a number of years now, the FCA has emphasised the importance of employers tackling NFM in order to promote a healthy, and regulatory safe, workplace culture. The FCA’s intention is for its rules to now catch up with those aspirations.
What does the FCA mean by “non-financial misconduct”?
The FCA defines NFM to encompass bullying, harassment or violence towards colleagues in the workplace. The conduct does not need to relate to one of the nine protected characteristics in the Equality Act 2010, meaning employers will need to ensure this broader approach is reflected in their policies on acceptable behaviour.
From September 2026, all SMCR firms will be required to assess whether incidents of NFM constitute breaches of the FCA’s Conduct Rules. The rule change will not apply retrospectively. In practice, given the ambiguity around whether or not NFM would be in scope for non-banks, many firms have in any event made clear that NFM is not acceptable contractually or by policy. NFM always has been and continues to be relevant to ongoing fitness and propriety assessments.
Has the FCA provided guidance?
While the COCON rule change is now settled, the FCA has proposed amending its draft supporting guidance for a further period of consultation until 10 September 2025. After this period, the FCA will determine whether providing guidance is helpful and, if so, whether any changes are required. Some aspects of practical interpretation and application may yet evolve, or the FCA may decide to leave judgment to the employing firms, without guidance from them.
The draft guidance directly addresses grey areas such as misconduct at social events organised in a personal capacity but linked to work, or inappropriate behaviour on personal social media accounts. In addition, the draft guidance also addresses NFM in the context of the fit and proper test for certified and senior manager employees, clarifying that NFM in any context (including in personal lives) may be of relevance to that assessment. The FCA aims to clarify its final position on the draft guidance by the end of 2025.
Practical next steps for HR and in-house lawyers
Non-banks should review CP25/18 to prioritise next steps to prepare for compliance with the COCON amendment from 1 September 2026. It has never been clearer that the FCA already expects banks to treat NFM as a breach of the Conduct Rules and to also ensure their processes align with those expectations.
- Review/reaffirm policies and guidance that touch on Conduct Rules:Firms should ensure that all policies and procedures relating to the FCA Conduct Rules are up to date and explicitly reference bullying, harassment and violence as conduct issues.
- Governance relating to NFM: Tackling NFM is a strategic priority for the FCA, regardless of the outcome of the consultation on the draft guidance. Learnings should be taken from the October 2024 findings of the FCA’s NFM survey in the wholesale sector, on which see here. Employers should ensure they are gathering data on NFM and are reporting this to board and senior management levels.
- Review decision-making processes on Conduct Rule breaches: The responsibility for assessing whether conduct or performance has breached the Conduct Rules varies greatly between employers. Whoever holds that responsibility should be briefed on NFM in the context of the Conduct Rules to ensure decisions are well founded and consistent. It is important also not to just look at the FCA examples in isolation and lose sight of the other scoping factors in COCON 1, such as where the conduct took place, in updating those decision-making processes, especially in relation to reports of COCON breaches and regulatory references.
- Reconsider policies on dignity at work/harassment, sexual harassment and bullying:Many firms will have updated these policies in connection with the introduction of the duty to prevent sexual harassment last autumn. Often such policies focus on the legal definitions of conduct that would be in breach of the Equality Act 2010, focusing on the nine protected characteristics, and a review is recommended.
- Plan future NFM training materials:Firms are required to train employees on the Conduct Rules on an ongoing basis. Employers should think about how best to keep the training impactful, tailor it to different categories of employee and provide suitable coverage of NFM as a potential Conduct Rule breach.
- Upskill people leaders:People leaders play a critical role in any cultural enhancement and need to be equipped for success. Coaching on how best to intervene in real time when witnessing NFM is rarely achieved by watching an e-learning module, with more value likely to come from in-person interactive sessions.
- Plan leadership communications on NFM: Employers should prepare a roadmap of leadership messaging on creating and maintaining a culture of respect where NFM is not tolerated. This should cross-refer to the employer’s whistleblowing platform and encourage employees to speak up without fear of reprisals.
- Verify data-sharing arrangements to support regulatory references:Employers should satisfy themselves that appropriate information relating to NFM-related Conduct Rule breaches is shared with teams responsible for preparing future regulatory references and that those teams understand the relevance of NFM occurring in private life to regulatory references for certified and senior manager employees.
- Provide feedback to the FCA on the draft guidance:Employers have the opportunity to further influence the content of the draft guidance and to share views on whether having guidance is a help or a hindrance. If any of the guidance or examples have left you with questions or uncertainty, then now is the time to raise this. The deadline for responses is 10 September 2025.
Reminder of key principles that will remain as before
In this context, “disciplinary action” only consists of any of the following: a formal written warning; suspension (where deployed as a disciplinary sanction, not for the purposes of investigating an issue); dismissal; or the reduction or recovery of remuneration.
The Conduct Rules do not apply to conduct in an employee’s personal life (although the same conduct may be relevant to fitness and propriety for certified staff and senior managers).
While NFM in or outside work may not breach the Conduct Rules, it could still breach internal policies, justifying disciplinary action.
The duty to report a Conduct Rules breach to the FCA only arises if the employer takes disciplinary action in response to such breach of the Conduct Rules.
Similarly, information about a Conduct Rules breach should only be included in a regulatory reference where disciplinary action has been taken in response (although the catch-all Question G on the form may bring NFM and other conduct back in scope).
Where disciplinary allegations of NFM are made against an employee but are not upheld, there is no requirement to include that information in a regulatory reference.
