Stricter Financial Conduct Authority Regulations Pertaining to Non-Financial Misbehavior
FCA Cracks Down on Workplace Misconduct in Financial Sector
The Financial Conduct Authority (FCA) has announced new rules aimed at tackling non-financial misconduct (NFM) such as harassment, bullying, and violence in the workplace within the financial services industry. These changes, set to come into effect on September 1, 2026, will extend the scope of the FCA's Code of Conduct (COCON) to cover serious NFM for non-bank firms [1][2][3][5].
The expanded enforcement will apply to approximately 37,000 additional non-bank firms, including asset managers, payment firms, e-money institutions, investment exchanges, and credit rating agencies with relevant permissions [1][3][5]. Firms without Part 4A permissions are excluded from these rules [1].
The FCA differentiates conduct rules from employment law, focusing on behaviours that may not meet legal thresholds but still impact firm culture and market integrity [5]. The regulatory body has launched a consultation, closing on September 10, 2025, on new Handbook guidance for the implementation of these rules and fitness/propriety standards related to NFM [1][3][4][5]. Final guidance is expected by the end of 2025.
Unwanted conduct that can amount to a breach of COCON includes violating a person's dignity, creating an intimidating, hostile, degrading, humiliating, or offensive environment, or violent conduct [5]. The FCA's policy statement on NFM, published on July 2, 2025, clarifies that it does not expect firms to monitor employees' private lives [5].
However, conduct in an individual's private life may be relevant to fitness and propriety if it demonstrates a willingness to disregard ethical or legal obligations, abusing a position of trust, or exploiting vulnerabilities [5]. The FCA has also stated that if social media activity indicates a real risk that the individual will breach requirements of the regulatory system, that will be relevant to their fitness and propriety [5].
Managers are expected to take reasonable steps to prevent NFM, such as failing to intervene to stop harassment, failing to take seriously or deal with complaints, and failing to operate the firm's policies, systems, and controls to detect it, can amount to a breach of ICR2 [5]. If a firm becomes aware of allegations that would, if substantiated, raise questions about an individual's fitness and propriety, they should consider what steps they can take to assess the impact of the alleged behavior and, where appropriate, ask for an explanation from the individual [5].
The FCA has made it clear that not all misconduct for which a firm might take disciplinary action will amount to a breach of COCON, and seriousness is not the only factor when assessing whether NFM is a breach of ICR1 (acting with integrity) or ICR2 (acting with due skill, care, and diligence) [5].
The new rules are part of the FCA's five-year strategy, which suggests more frequent regulatory action to combat NFM using supervisory, rather than formal enforcement, powers [5]. The aim is to drive cultural change in the financial services industry by demonstrating that NFM will not be tolerated [5].
The amended rules will not apply retroactively and will not apply to payments, e-money firms, regulated investment exchanges, or credit rating agencies [5]. Firms should reconsider their policies and procedures for addressing NFM, determine whether any enhancements may be necessary, and schedule updates for after any guidance is published [5]. Training on the new rules should be implemented, and the tone from the top should promote a culture in which NFM is not tolerated [5].
In summary, the FCA's new rules signal a more assertive regulatory stance on workplace behaviour beyond traditional financial misconduct, aiming to drive cultural change in the financial services industry [3][5].
[1] FCA (2025). Policy statement on non-financial misconduct. [Online] Available at: https://www.fca.org.uk/publication/policy/ps25-21.pdf [2] FCA (2025). FCA's handbook. [Online] Available at: https://www.fca.org.uk/firms/handbook [3] FCA (2025). FCA's Code of Conduct Sourcebook (COCON). [Online] Available at: https://www.fca.org.uk/firms/handbook/coocon [4] FCA (2025). Consultation on non-financial misconduct. [Online] Available at: https://www.fca.org.uk/publication/consultation/cp25-27.pdf [5] FCA (2025). FCA's approach to non-financial misconduct. [Online] Available at: https://www.fca.org.uk/firms/regulatory-approach/non-financial-misconduct
- The new employment law policies introduced by the FCA, focusing on non-financial misconduct, are expected to impact businesses in the finance sector, including asset managers, payment firms, and credit rating agencies.
- As a part of the General News, the FCA's Policy-and-Legislation on non-financial misconduct will significantly affect finance and business operations, spurring a cultural shift towards zero tolerance for workplace misconduct.
- These new rules, determined by the FCA, will widen the scope of their Code of Conduct (COCON) and aim to enhance market integrity and firm cultures, influencing Politics and shaping the future of the financial services industry.
