Insights ¦ Tackling non-financial misconduct in financial services

Key Take Aways

1. The FCA is extending its rules on non-financial misconduct (NFM) to non-banking financial firms, aligning non-bank and bank standards from September 2026.

2. The regulatory amendments focus on behaviour such as bullying, harassment, and violence, recognising their critical role in cultural failings within firms.

3. Guidance in the Code of Conduct (COCON) and the Fit and Proper (FIT) sourcebooks aims to support consistent application of conduct rules and assess individual fitness and propriety.

4. New rules specify that serious misconduct can constitute breaches of conduct rules, subject to consideration of the behaviour’s impact and seriousness.

5. The scope of COCON in non-banks will expand, explicitly covering misconduct against colleagues in work-related contexts, including private or social events linked to the firm.

6. The proposed guidance clarifies the boundary between personal and professional behaviour, with an emphasis on the context and conduct impact on workplace culture.

7. The FCA recognises subjective assessments exist around ‘serious’ misconduct but aims to use objective criteria, such as whether conduct had a significant negative effect.

8. The framework expects firms to be proactive in identifying, investigating, and reporting misconduct, especially conduct that could undermine public or market confidence.

9. The FCA is revising its approach on historical incidents, clarifying that the new conduct rules will not apply retrospectively but firms should rectify past misclassification if aware of prior misconduct.

10. Supporting transparency, the guidance on regulatory references emphasises fair and accurate disclosures, avoiding automatic lifelong disclosures of misconduct unless deemed serious at the time.

11. The cost estimates for implementing these rules have been refined, with total ongoing costs projected at approximately £85 million, driven largely by changes to the scope of conduct.

12. The FCA’s overarching objective is fostering a culture of accountability and integrity, utilising clearer rules and guidance to help firms prevent toxic behaviours and maintain public trust.

Key Statistics

• Total estimated cost of NFM package initially was £303 million (implementation) and £180 million (ongoing).

• Revised cost estimates based on current data suggest a total of around £75 million (implementation) and £40 million (ongoing).

• The firm population has fallen from approximately 45,000 to just under 38,000 since the original analysis.

• Data indicates 19% of firms in the original survey were large companies, contrasting with an estimated 3% in the regulated population.

• The average implementation cost per firm ranges from £900 for micro firms to £9,300 for large firms.

• The FCA estimates the combined cost of rule and guidance at £75 million (implementation) and £40 million (ongoing).

Key Discussion Points

• The importance of addressing non-financial misconduct as a vital indicator of corporate culture, with a focus on behaviours like harassment, bullying, and violence.

• The alignment of rules across banking and non-banking firms aims to close regulatory gaps and enable consistent enforcement.

• Enhancing guidance in COCON and FIT is seen as key to ensuring clear, fair, and consistent application of conduct and fitness rules.

• The FCA emphasises the need for proportionate responses, with guidance designed to reduce unfair outcomes and promote objectivity in misconduct assessments.

• The scope of misconduct extends beyond direct financial dealings to include conduct in social or private contexts that affect workplace culture.

• Transparency around misconduct reporting and regulatory references is central, with a commitment to fair disclosures aligned to the behaviour’s seriousness.

• The FCA recognises that historical misconduct will not be subject to new rules but firms should review past classifications where applicable.

• Cost estimates have been refined downward, reflecting better data and an increased focus on targeted rule changes.

• The guidance highlights that misconduct outside work can impact fitness and propriety, especially if behaviour indicates a willingness to disregard ethical standards.

• There is an emphasis on fostering psychological safety and inclusive cultures, with regulatory frameworks supporting cultural change.

• The regulation aims to deter toxic behaviours that undermine trust, attract diverse talent, and support the positive reputation of the UK financial sector.

• Overall, the article underscores the FCA’s ongoing commitment to building a safer, more accountable, and culturally robust financial services industry.

Document Description

This article is an FCA consultation document outlining proposed amendments to rules relating to non-financial misconduct in financial services firms. It details the scope of new conduct rules, guidance to promote consistent application, and the broader strategic aims of improving industry culture, transparency, and public trust. It includes updates on cost-benefit analysis, scope, implementation timelines, and responses to stakeholder feedback, aimed at senior managers responsible for governance and compliance within financial firms.