"Non-financial misconduct" (NFM) by employees of financial services firms is now a key focus for the Financial Conduct Authority (FCA).
For several years, the regulator has emphasised the importance of tackling NFM to promote healthy, and regulatory safe workplaces, and it is now formally setting expectations for employers.
NFM is defined by the FCA as bullying, harassment or violence towards colleagues in the workplace. Behaviours need not relate to protected characteristics from the Equality Act such as race, age, or gender.
To help tackle NFM, the FCA is bringing it unambiguously into the scope of the Conduct Rules for non-banks by amending the Code of Conduct sourcebook (COCON), aligning it with its regulation of banks, from 1 September 2026.
The FCA has also published draft guidance (CP25/18) following its earlier NFM consultation. This aims to directly address NFM related 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. There is time to provide feedback on the draft guidance until 10 September 2025.
Changes to conduct breaches
To help drive the consistency it strives for, the FCA has proposed that all financial sector firms under the Senior Managers and Certification Regime will be required to assess whether incidents of NFM constitute breaches of the Conduct Rules from September 2026.
Responsibility for assessing whether behaviours or performance breaches the Conduct Rules varies greatly between employers. For some firms, assessments are formed by members of a panel, with representatives from HR, legal and compliance. Whoever holds responsibility should be briefed on NFM in the context of the Conduct Rules to ensure decisions are well founded and consistent.
The FCA's draft guidance on NFM
The draft guidance addresses NFM in the context of fit and proper assessments for certified staff and senior managers. It makes clear that NFM in any context (including in personal lives) may be of relevance to the assessments.
A consultation period on the guidance is open until 10 September 2025. After this, the FCA will decide whether providing guidance is helpful and if further amendments are required. The FCA aims to give its final position by the end of 2025.
Unchanged Fundamentals: What you need to remember
The duty to report a Conduct Rules breach to the FCA only arises if the employer takes disciplinary action in response to such breach.
In this context, “disciplinary action” consists of formal written warnings, suspensions (deployed as disciplinary sanctions, not for the purposes of an investigation) dismissals, or salary/bonus reductions or recovery.
Information about a Conduct Rules breach should only be included in regulatory references where disciplinary action has been taken (although the catch-all question on the form may bring NFM and other conduct back in scope). When 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.
Conduct Rules do not apply to an employee’s personal life, though private actions may be relevant to fitness and propriety for certified staff and senior managers. While NFM outside of work may not breach the Conduct Rules, it could still breach internal policies, justifying disciplinary action.
Immediate first steps to prepare
Firms should keep up to date with the FCA's final view on the draft guidance on NFM, due by the end of the year and prepare for compliance with COCON changes from 1 September 2026.
Financial services employers 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.
When preparing guidance on NFM for those with responsibility for assessing Conduct Rule breaches, employers should not to lose sight of the other scoping factors in COCON, such as where the conduct took place.
Employers should have a revamp of dignity at work, harassment, sexual harassment and bullying policies. Many firms will have updated these following the introduction of the duty to prevent sexual harassment in 2024, but those yet to review their approach should take this opportunity to catch up and also to cover NFM.
Employee training on Conduct Rules should provide suitable coverage of NFM.
Line managers and senior members of staff should set a good example to team members. Employers will want to be confident that their leaders are equipped to intervene in real time when witnessing NFM.
Employers should prepare leadership messaging reaffirming a culture of respect where unacceptable behaviour is not tolerated. This should reference the employer’s whistleblowing platform and encourage employees to speak up.
Arrangements should be made to ensure that team members who handle regulatory referencing have access to appropriate information on NFM and understand the relevance of NFM occurring in private lives of certified and senior manager employees.
Crucially, employers can influence the content of the FCA's guidance on NFM and share views on whether having guidance is a help or a hindrance. The deadline for responses is 10 September 2025. Businesses can give their thoughts to the consultation here.
