Non-Financial Misconduct – FCA issues new policy statement and consults on guidance

Overview

On 2 July 2025, the Financial Conduct Authority (FCA) published a significant policy statement and consultation paper (CP25/18) addressing non-financial misconduct (NFM) in the financial services sector. It comes nearly two years after its previous consultation on NFM and Diversity and Inclusion (D&I) in the financial sector (CP23/20).  Since then, in March 2025, the FCA announced that it was dropping its D&I proposals, but in this latest paper, it has confirmed that it is pressing ahead with its proposals on NFM, and to extend the same rules to non-banks.

The FCA will amend its Code of Conduct (COCON), to include specifically workplace bullying, harassment, and violence. This follows strong industry and stakeholder support for a more robust regulatory framework to address NFM and aligns with the FCA’s broader strategy to foster healthy work cultures, raise standards and increase accountability, and build trust in financial services.

The new rule will apply to regulated firms with a Part 4A permission. The FCA has said in its press release that it will not apply to those without a Part 4A permission, such as “payments and e-money firms, regulated investment exchanges and credit ratings agencies” and “the Senior Managers and Certification Regime does not apply to such firms”.

In addition, the FCA will consult on draft guidance relating to COCON and the Fit and Proper Test for Employees and Senior Personnel (FIT).

Key Proposals

• Extension of COCON Scope: The FCA will extend the scope of COCON in non-banking firms to match that of banks, making it clear that serious misconduct (in the form of bullying, harassment, and violence) between staff is a regulatory concern. This change will take effect from 1 September 2026.
• Alignment with Employment Law: The wording of the change to COCON has been revised since the 2023 proposals, to more closely align with the employment law test for unlawful harassment. However, the workplace misconduct in scope is not limited to the “protected characteristics” under the Equality Act, and so non-discriminatory harassment (or "bullying") will also be caught.
• Regulatory References: The FCA confirms that serious substantiated NFM may need to be disclosed in regulatory references, helping to deter misconduct and counter ‘rolling bad apples’ – people moving from firm to firms without appropriate disclosure. However, the FCA considers that the new COCON rule does not apply retrospectively and “does not expect firms to do any retrospective analysis of whether it has incorrectly determined a conduct rule breach in the past”.
• Clarification and Guidance: The FCA is consulting on the need for additional Handbook guidance in COCON and FIT to help SMCR firms consistently interpret and apply the rules. This includes guidance on and examples of the boundary between work and private life; how NFM may be outside of the scope of SMCR financial activities or COCON; distinctions between breaches of Individual Conduct Rules 1 (integrity) and 2 (due skill, care and diligence); factors for determining whether NFM breaches conduct rules; and reasonable steps that managers must take to prevent and address NFM.
• Fitness and Propriety: The draft additional FIT guidance, if introduced, will clarify that serious NFM, including conduct outside the workplace (e.g., criminal convictions, allegations or posts on social media), may be relevant to fitness and propriety assessments. However, the FCA does not expect firms to proactively monitor employees’ private lives.
• COND and SYSC: The FCA has decided not to proceed with any amendments to the Threshold Conditions (COND) or Senior Management Arrangements, Systems and Controls (SYSC) sourcebooks.

Next Steps

The consultation on the draft guidance is open until 10 September 2025. The FCA intends to finalise any accompanying guidance by the end of 2025, ahead of the new rules coming into force on 1 September 2026.

Conclusion and Recommendations

The FCA’s latest consultation marks a long-awaited step forward in embedding NFM within the regulatory perimeter for all financial services firms. In-scope firms are recommended to begin preparations now (including reviewing and if necessary, updating internal policies and procedures, and scheduling training) to ensure their cultures, policies, and practices are in compliance with the new rules by 1 September 2026.