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.

Beyond the Banking Sector

The FCA confirms it is extending its rules around bullying, harassment and violence to firms beyond the banking sector, by amending the scope of its Code of Conduct for non-banks (although the application of COCON for banks remains wider than that for non-banks in a few discrete areas). 

It is not currently clear when NFM would amount to a conduct rule breach in non-banking firms. 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.

The new 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.

Conduct rules 

The FCA is implementing its updates to COCON with minimal changes to the draft consulted upon in 2023. 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 new conduct rules to align these more clearly with existing employment law.

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. 

Changes to the 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 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. 

The formalisation of the FCA’s expectations on senior managers in dealing with non-financial misconduct overlays additional layers of complexity that both firms and senior managers must now navigate, often at pace and in tandem with employment law considerations. 

The FIT regime

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. This includes how employees use social media and the relevance of behaviour in private and personal life.

Social media is 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.

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 is open until 10 September 2025. The FCA intends to set out its final regulatory approach before the end of the year.

The FCA’s press release is here.

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