FCA publishes long awaited non-financial misconduct rules and guidance

The FCA’s long awaited “next steps” on non-financial misconduct (“NFM”) have now been published. Building on its previous consultation in 2023, CP25/18 confirms changes to COCON rules in a policy statement and, in the same document, consults on additional handbook guidance on the application of COCON and FIT, which the FCA may finalise in due course if there is “clear support” for it from firms.

The new COCON rules concerning the management of non-financial misconduct will apply to both banking and non-banking firms from 1 September 2026. They will not apply retrospectively.

Beyond the Banking Sector

The FCA confirms that its amendments to COCON broaden the scope of the conduct rules for non-banks to cover NFM. The FCA expects that aligning the conduct rules for banks and non-banks for cases of serious non-financial misconduct will help drive consistency of approach and enable robust action by firms (and the draft COCON guidance now expressly states that it applies to both banks and non-banks).

The new COCON rules confirm that unwanted conduct that (i) has the purpose or effect of violating an individual’s dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment; or (ii) is violent to an individual, can result in a breach of the conduct rules. 

The Policy Statement, however, does address comments made in responses to that consultation. One of the criticisms of the 2023 proposals was the lack of alignment with employment law, including the Equality Act 2010. Whilst the FCA has maintained that its regime covers a wider range of workplace misconduct, it has decided to adjust the language contained in the new conduct rules to align this more clearly with existing employment law.

The changes do not completely level the playing field, as there is still an exclusion where the NFM relates purely to the non-bank firm’s unregulated business. This could lead to some inconsistent results as staff members within different parts of a firm who behave in the same way will face different consequences.  

Draft COCON guidance 

The draft guidance is intended to support firms in assessing whether NFM is sufficiently serious to amount to a conduct rules breach.

Boundary between work and personal life

Under s.64A FSMA, the FCA is prevented from considering conduct in personal and private life when making conduct rules for individuals (in contrast to the position when assessing fitness and propriety, where relevant matters may be considered wherever they occur). This has made it difficult for firms to understand when NFM might result in a breach of the conduct rules, as distinct from being considered as part of an F&P assessment, where it would arguably be a more natural fit. 

The proposed changes to the Handbook guidance includes examples intended to clarify the boundary between work and personal/private life where firms are looking to apply the conduct rules, together with factors to consider when assessing whether or not NFM could be in scope of the conduct rules and factors relevant to seriousness.

Reasonable Steps

The proposed changes to the Handbook guidance also includes examples of reasonable steps senior managers could take to protect staff against NFM and confirms that a failure to do so could amount to a conduct issue for the senior manager in question. These include intervening to stop inappropriate behaviour, taking complaints seriously and dealing with them appropriately, and providing a safe environment for people to raise concerns about inappropriate behaviour. The latter reinforces the expectation that the FCA has had for a number of years around firms establishing a ‘speak up’ culture. 

Overall, the revisions to the draft guidance are helpful, although much of the CR1 and CR2 specific guidance overlays additional layers of complexity that both firms and senior managers would have to navigate and underlines how fact-specific assessments here are likely to be. The risk of inconsistent approaches between firms remains.  

Proposed FIT guidance

The FCA has also proposed updating its Handbook guidance covering how firms should consider non-financial misconduct when assessing if someone is “fit and proper” to work in financial services. 

The FIT guidance proposed in CP25/18 is substantially revised from the guidance included in CP23/20. The latest iteration includes specific consideration of the impact of social media activity by employees and the relevance of behaviour in private and personal life. Social media is stated as likely to be relevant to FIT where it indicates a “real risk the person will breach the requirements of standards of the regulatory system”. Similarly, conduct in personal or private life may be relevant if it demonstrates a willingness to disregard ethical or legal obligations, abuse a position of trust, or exploit vulnerability of others and is sufficiently serious that it could undermine public confidence in the regulatory system.

Again, whilst this iteration of the draft guidance is an improvement on the last, plenty of room for debate re the facts of specific cases remains.

Regulatory references

Under the new rules, the expanded scope of COCON will mean that in practice serious and substantiated cases of poor personal behaviour will have to be shared in regulatory references, making it harder for individuals to mask this when moving from firm to firm. 

Otherwise, the FCA has largely rejected calls from industry – made in response to its 2023 CP - for further guidance on how to address allegations of, and investigations into, NFM, in regulatory references, particularly given the broad scope of Question G. This is a particular challenge where the investigation proved inconclusive or could not be completed. The FCA considers the current guidance for firms on compiling regulatory references to be clear.

Next Steps

The consultation on the draft guidance ends on 10 September 2025, with the FCA indicating that – if industry confirms that guidance would be helpful – it will look to publish the final version of this before the end of the year.  The FCA is continuing to encourage the industry, including via trade associations, to take forward broader work to support firms in addressing NFM following the findings of the FCA’s survey into the management of NFM by banks, brokers and wholesale insurance firms, the results of which were published in October 2024. 

The FCA’s press release is here.

The consultation and policy statement (CP25/18) is here.