What Has the FCA Finalised?
1) Final Handbook Guidance on Non-Financial Misconduct
The FCA has now published final guidance to support firms in applying its expanded rules on non-financial misconduct (NFM), following consultation responses where 95 % of firms asked said guidance would be helpful. (FCA)
This guidance sits alongside the new Conduct Rules (COCON) and Fit & Proper (FIT) provisions, and it explains how firms should assess, interpret, and act on serious non-financial misconduct issues among employees. (Covington)
Key Changes & Clarifications in the Final Guidance
2) Rule Expansion: COCON Now Covers NFM for Non-Banks
- From 1 September 2026, the FCA extends the Conduct Rules to cover non-financial misconduct such as bullying, harassment, violence, or conduct that creates an intimidating, hostile or degrading environment. (DLA Piper)
- This change expands coverage beyond banks to an estimated 37,000 regulated financial firms (including insurers, asset managers and many non-bank lenders). (peoplemanagement.co.uk)
This means misconduct that was previously treated mainly under employment or internal disciplinary frameworks can now also be a regulatory breach under FCA rules, with possible reporting and enforcement consequences. (DLA Piper)
What the Guidance Covers
3) Practical Application for Firms
The guidance helps firms interpret when misconduct crosses the threshold to a regulatory issue, including practical tools such as:
- Examples and flowcharts showing how the non-financial misconduct rule maps to different types of behaviour. (Covington)
- How to assess whether conduct is serious enough to breach Conduct Rules. (Mondaq)
- Guidance on assessing fitness and propriety where misconduct could indicate future regulatory risk. (Mondaq)
- Clarification on managerial accountability, reinforcing that firms must act proportionately and managers are accountable only when they could reasonably have known and had authority to act. (Covington)
4) Boundaries With Employment & Private Life
- Misconduct in a person’s private life remains largely outside the scope of COCON, unless it creates a material risk that future regulatory breaches will occur. (Covington)
- Firms are not expected to investigate trivial or implausible allegations or to breach privacy laws in conducting assessments. (Covington)
- Conduct at firm- or client-organised events can still be treated as work-related. (sidley.com)
Reporting & Regulatory References
5) Regulatory References and Reporting
- Serious, substantiated misconduct now must be disclosed in regulatory references, just as with financial misconduct — ensuring individuals cannot evade consequences by moving between firms. (DLA Piper)
- This drives transparency for future employers and strengthens accountability across the industry. (DLA Piper)
Why This Matters
6) A Shift in FCA’s Cultural Agenda
The FCA’s drive to tackle non-financial misconduct stems from its view that such behaviour is one of the clearest indicators of unhealthy culture within financial firms. Misconduct like harassment or bullying can suppress concerns being raised, hinder ethics, and ultimately contribute to broader harms in markets and consumer outcomes. (FCA)
By embedding NFM into regulatory misconduct frameworks, the FCA aims to:
- Strengthen workplace culture and governance.
- Improve accountability for behaviour, not just financial outcomes.
- Reduce reputational risk across the sector.
- Protect consumers and markets by fostering healthier firms. (FCA)
Upcoming Implementation Timeline
| Date | Key Change |
|---|---|
| 1 Sept 2026 | New Conduct Rule (COCON) for NFM comes into force across banks and non-banks. (DLA Piper) |
| 1 Sept 2026 | Final Handbook guidance also takes effect. (Mondaq) |
What Firms Should Do Now
To prepare, firms are advised to:
- Review and update internal conduct policies and disciplinary procedures. (sidley.com)
- Integrate the FCA’s guidance into SMCR and FIT frameworks. (Mondaq)
- Train managers and HR/compliance teams on identifying and responding to NFM consistent with regulatory expectations. (Covington)
- Ensure mechanisms exist for capturing and reporting serious misconduct to the FCA where required. (DLA Piper)
In Summary
The FCA’s finalised guidance on non-financial misconduct represents a significant regulatory step in how the conduct and culture of financial services firms are supervised in the UK. It broadens accountability for serious workplace misconduct, clarifies practical expectations for firms, and aligns regulatory standards more closely with modern expectations for workplace behaviour — all with the aim of strengthening trust and integrity in the sector. (FCA)
Here’s a case-study-style breakdown and industry reaction to the UK Financial Conduct Authority (FCA) finalising its guidance on non-financial misconduct (NFM) for financial services firms, including practical examples, critiques, and expert comments:
Background: Why This Matters
The FCA has finalised Policy Statement (PS) 25/23 and accompanying Handbook guidance that explains how non-financial misconduct — such as bullying, harassment, violence or other behaviour that undermines dignity and respect — can breach conduct rules and affect fitness-and-propriety assessments. This guidance supports new rules coming into force on 1 September 2026 that embed NFM into the Conduct Rules and Fit & Proper test for employees across the UK financial sector. (FCA)
Case Study 1 — Workplace Behaviour Escalating to Regulatory Concern
Scenario
An investment firm’s internal HR data shows a pattern of complaints about intimidation and verbal abuse by a senior manager. Although not resulting in criminal charges, the behaviour has a clear negative impact on team morale.
Regulatory Interpretation
Under the new guidance, repeated serious non-financial misconduct such as this can be treated as a breach of individual Conduct Rules, even if no financial rules are violated. Firms must consider:
- Whether the conduct is sufficiently “serious” (e.g., degrading or humiliating behaviour),
- Whether it affects the individual’s fitness and propriety to hold their position,
- Whether action taken is documented and consistent with FCA expectations. (PwC)
Firm Response
The firm updates policies, implements extra training for managers, and creates reporting and escalation paths tailored to the FCA’s seriousness threshold — including clearer definitions of when conduct crosses the line into regulatory concern. (PwC)
Outcome:
The regulator would expect consistent evidence that the firm took reasonable steps to investigate, remedy, and, if necessary, sanction behaviour — demonstrating accountability and risk mitigation.
Case Study 2 — Private Life Conduct Appearing Relevant to Fitness & Propriety
Scenario
A senior employee posts repeated threats and derogatory comments on a private social media account that do not explicitly mention their workplace but clearly reflect harmful intent or attitudes toward protected groups.
Regulatory Interpretation
The FCA’s final guidance clarifies that firms do not have to monitor private lives routinely, but conduct in private life can be relevant if it creates a material risk of regulatory breaches or undermines trust. Not all private behaviour is in scope, but repeated harmful conduct may be. (PwC)
Firm Action
The firm conducts a focused, lawful assessment, determines the conduct shows a pattern that could spill into workplace harm, and increases oversight about acceptable conduct in private channels tied to professional responsibilities.
Outcome:
Fitness-and-propriety decisions may reflect this behaviour if it materially impacts regulatory confidence — but firms are not expected to surveil innocent or lawful private conduct. (PwC)
Emerging Themes from the Guidance
1) Practical Tools, but No Exhaustive Case Library
The FCA provides examples and flow charts, but stopped short of prescribing dozens of case studies — prompting commentary that firms must apply judgement and can’t rely on pre-set checklists. (Insurance Times)
- Critics note the lack of detailed case studies makes practical implementation harder.
- The FCA stressed that guidance can’t cover every situation, and that firms must develop their own judgement frameworks. (Insurance Times)
Industry & Expert Commentary
Positive / Supportive
James Alleyne (Kingsley Napley) commented that the FCA’s move is long anticipated and offers needed clarity, helping firms implement the rules effectively and raising behavioural standards across the sector. (Financial Reporter)
Critical Views
Some commentators — such as Imogen Makin (WilmerHale) — have expressed concern that although the guidance is useful, the absence of more detailed case studies limits practical value, especially for firms seeking concrete precedents. (Insurance Times)
Key points from critiques:
- Firms want more real-world scenarios illustrating when internal conduct becomes a regulatory concern.
- There’s anxiety about consistency of application without clearer illustrations. (Insurance Times)
What Firms Are Being Asked to Do (Practical Takeaways) Revise governance, HR and conduct policies to align with NFM expectations.
Train managers and compliance teams on FCA seriousness thresholds and guidance application.
Accelerate reporting and escalation channels so that potential misconduct is identified and judged consistently.
Document decisions clearly — showing how seriousness and impact judgments were made.
Review fitness & propriety processes to incorporate evidence linked to conduct issues, including in regulatory references. (FCA)
Looking Ahead
- The new Conduct Rule on non-financial misconduct and the final guidance become effective 1 September 2026.
- Firms must be ready well before that date with policies, training, and consistent internal definitions. (FCA)
Overall Impact & Sector Commentary
Regulatory shift: The FCA’s move reflects a broader strategy to strengthen firm culture and trust, not just compliance with financial rules — treating workplace conduct as a leading indicator of wider regulatory risk. (FCA)
Industry reaction: There is broad approval that the FCA has given important clarity, but also concern that firms will need significant internal operational work to translate principles into everyday decisions — especially for borderline or ambiguous cases. (Financial Reporter)