The FCA has confirmed its final guidance to tackle serious non-financial misconduct in financial services.
The guidance aims to support firms to tackle bullying, harassment and violence in financial services, after they asked for additional support.
First announced in July, the rules set clearer standards for how financial services firms should address non-financial misconduct more closely aligning the rules for banks and non-banks.
The FCA said it wanted to "give firms the confidence to act against serious misconduct, drive consistency and make it clearer when non-financial misconduct is a breach of our rules".
When it first changed the rules earlier this year, the FCA asked firms if they wanted additional guidance to help them take action. 95% of those who responded to the consultation agreed, so the regulator is now providing this final guidance.
The guidance covers how firms can apply the rules on minimum standards of behaviour for financial services employees, and the factors they should take into account when assessing whether someone is fit and proper for their role.
The FCA has made some small changes to address the main areas of feedback, with new examples and flow charts to support the application of the rules and clearer alignment with employment law.
The FCA has also issued clarification that managers' accountability is relative to their knowledge and authority and that firms are not expected to investigate "trivial or implausible allegations" or breach privacy law.
Lorraine Johnston, partner at Ashurst, commented: "With 95% of respondents confirming that they wanted the FCA to produce guidance, the FCA has delivered what the market has asked for.
"There are some areas of change that the industry will welcome (such as the introduction of the concept of a reasonable steps defence for those line managers that will have additional liability for the conduct of those that they manage). As a package however, the new rules and guidance will require significant changes to firms, their policies, and HR processes.
"Delivered just before the holiday break, this is likely to be the put to the top of firms' to do list for 2026."
Imogen Makin, counsel at WilmerHale, said: “The FCA’s Final Guidance on Non-Financial Misconduct, published this morning, should prove useful for firms in their implementation of the rules. For example, it includes flow diagrams setting out the steps to determine whether conduct is in scope of COCON and potentially represents a breach.
“It also includes guidance on the applicability of the rules to staff in a shared function, where certain individuals deal with financial services business and others do not. In these circumstances, conduct will be in scope if either the perpetrator or subject deals with the financial services business. This seems like an overreach and means that individuals who do not deal with the financial services business of a firm can now be subject to FCA rules. As a result, firms will need to ensure that almost all employees are trained on the new rules; only those that work in a separate function that does not interact at all with the financial services business of a firm will be out of scope.
“The FCA has also declined to provide more case studies, stating that the guidance cannot cover every scenario and the primary responsibility for preventing and dealing with it lies with firms themselves. This is particular cause for concern, given that the FCA confirmed this morning it will now “focus on how firms are tackling it [NFM] in practice”. Those in scope of the new rules should, therefore, ensure they focus on training their employees and enhancing their policies and procedures now, to make clear the conduct that is unacceptable and that non-financial misconduct will not be tolerated. This should be done in advance of 1 September 2026 when the new rules come into force, as FCA scrutiny now seems inevitable.”
James Alleyne, partner in the financial services regulatory team at Kingsley Napley LLP, commented: "The FCA has long signalled its intention to raise standards in the regulated sector and will hope this guidance gives firms the certainty they have been craving to implement the new rules and standards effectively. The regulated community will particularly welcome the clarifications around fitness and propriety assessments as well as the distinction between the private and professional lives of staff subject to the conduct rules. One big question is whether or not the FCA will start enforcing directly for non-financial misconduct or instead will rely on firms to police this issue; only time will tell what the answer to that is."
Francesca Lopez, senior associate in the employment team at Kingsley Napley, added: "Regulated firms now have until September 2026 to get ready for the new conduct rules to take effect. This means there is still time to review and reiterate policies on bullying, discrimination, and harassment for example, and to ensure whistleblowing channels are working effectively. Key will be training, ensuring all staff understand the behaviours that are unacceptable and that managers are equipped to identify and handle serious issues of non-financial misconduct. These have long applied from an employment law perspective but the fact the regulator may now take an interest may have greater firm and career reputation implications."
