The UK FCA’s non-financial misconduct framework: Implementation strategies ahead of September 2026

Introduction

The financial services industry is facing a significant cultural and regulatory shift. In July 2025, the UK Financial Conduct Authority (FCA) published new rules¹ setting clearer standards for how financial services firms should address non-financial misconduct. The rules aimed at aligning the conduct rules in banks and non-banks for cases of serious non-financial misconduct (NFM), with implementation scheduled for 1 September 2026. Responding to firms seeking clarity on the new rules, in December 2025 the FCA published revised guidance.² Although the new guidance does not provide granular case studies, it offers valuable insight into the FCA’s attitude and approach to evaluating how firms handle workplace misconduct.

The new framework applies to all firms under the Senior Managers and Certification Regime (SMCR), representing a significant expansion of regulatory expectations. For firms that are governed by SMCR, the progressive integration of NFM into the FCA Code of Conduct (COCON)³ and the FCA Fit and Proper test for Employees and Senior Personnel (FIT)⁴ places much greater emphasis on how policies measure up in practice. Firms should take this opportunity to review and test their frameworks to ensure they are robust and effective.

The framework

Through the new guidance, the FCA has amended COCON to explain how NFM can breach conduct rules and updated FIT guidance on how NFM affects fitness and propriety assessments. In response to consultation feedback, the FCA has made targeted amendments, including:

• New flow diagrams embedded in the Handbook to guide firms through the application of COCON
• Scenario tables illustrating when conduct falls within or outside scope, particularly for shared functions and mixed businesses
• Clearer alignment with employment law, including examples showing purpose and effect are equally important
• Clarified manager accountability relative to knowledge and authority, addressing concerns about disproportionate liability on individual managers
• Revised social media guidance, deleting the word “offensive” to make clear lawful views will not automatically call fitness into question

The guidance makes clear that establishing and maintaining an effective NFM framework may not only prevent misconduct from occurring in the first place but also enable firms to avoid regulatory action, secure more favourable outcomes in enforcement, and successfully defend against allegations. Conversely, insufficient attention to NFM will aggravate a firm’s position and may result in less favourable outcomes.

Defining non-financial misconduct: the “serious” threshold

NFM refers to serious misconduct described in rule COCON 1.1.7FR,⁵ which includes bullying, harassment and violence. The guidance stresses that not all improper behaviour will breach COCON; the conduct must be sufficiently serious. The FCA has confirmed that the seriousness threshold is aligned with the threshold for harassment under the Equality Act 2010, namely unwanted conduct having the purpose or effect of violating an individual’s dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment.⁶

The FCA added detailed factors for assessing seriousness at COCON 4.3.8G,⁷ including whether conduct is repeated or part of a pattern, its duration, impact on the subject, seniority differences and mitigating or aggravating factors. Minor incidents of poor workplace behaviour that do not have the purpose or effect of violating dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment will not breach FCA rules.

For firms, this alignment with employment law provides a familiar benchmark, although the FCA has declined to adopt a more restrictive definition of NFM.

Work related versus private conduct

The FCA added a comprehensive table of scenarios at COCON 1.3.7G⁸ illustrating when conduct is generally within or outside the scope of COCON, covering client events, training courses, social occasions, remote working, commuting and social media. For firms that frequently host investor roadshows and networking events, this guidance provides practical clarity.

COCON 1.3G⁹ confirms that COCON does not apply to private or personal life. However, the guidance at COCON 1.3.17G¹⁰ articulates scenarios where conduct outside the workplace may be closely enough connected to work to fall within the scope of COCON, such as misconduct at training events, award ceremonies, client events or industry conferences. Further, the guidance states that private conduct may be relevant to fitness and propriety even if it is unlikely to be repeated at work. This applies where the conduct demonstrates a willingness to disregard ethical or legal obligations, abuse positions of trust, or exploit vulnerabilities.

Social media activity indicating material risk of breaching regulatory requirements is also relevant to fitness and propriety. However, the FCA revised its social media guidance, deleting the word “offensive” and clarifying that a lawful expression of controversial views will not in itself call fitness into question. The FCA added that firms generally need not monitor their staff’s private lives and need not investigate trivial, implausible or non-material allegations. This balanced approach should provide reassurance to firms concerned about an undue administrative burden.

Manager accountability: reasonable steps

Under COCON 2.1.2R,¹¹ managers should take reasonable steps to prevent harassment and other serious misconduct. In response to concerns regarding disproportionate liability, the FCA revised the guidance to clarify that managers will not be held responsible for failing to stop NFM if they could not reasonably have known about it or did not have authority to act in the particular case.

In the new guidance, the FCA also added comprehensive provisions at COCON 4.1.8-A to 4.1.8-D setting out examples of reasonable steps managers might take and clarifying circumstances where it would not be reasonable to expect action. For firms with lean management structures, clarity on manager accountability is essential. Specifically in the case of investment funds, portfolio managers and senior investment professionals should understand their obligations are calibrated to their actual knowledge and authority.

What should firms do now?

Policy and training

Firms should now have a clear definition of NFM applicable across codes of conduct, HR policies and whistleblowing procedures. Firms should also review their existing policies to ensure they explicitly address NFM, update regulatory reference procedures, clarify reporting obligations and define the work-life boundary using the FCA’s flow diagrams.

There should also be a greater focus on specifically tailored training. For example, investment professionals should have sessions on conduct at investor meetings and conferences; managers on their duty to prevent harassment; HR and compliance teams on triaging allegations and assessing seriousness; and all staff on their broad obligations including conduct towards service providers.

Governance and investigation

Firms are not expected to investigate trivial or implausible allegations. Effective triaging is therefore essential to avoid over-burdening compliance resources while ensuring serious matters are properly addressed.

Firms should develop clear criteria for initial assessment of allegations, considering factors such as the nature and seriousness of the conduct alleged, whether it falls within the scope of COCON, and whether investigation is proportionate. The FCA’s flow diagrams embedded in the Handbook provide a structured approach to determining when conduct falls within scope and when investigation is warranted.

Firms should also establish clear escalation pathways specifying at what point allegations must be escalated from line managers to HR, compliance or the board. A key way of ensuring this process is actively managed is for boards or relevant governance committees to receive regular reports on NFM incidents, investigations, outcomes and cultural indicators.

Cultural initiatives

Tackling NFM helps foster inclusive workplace cultures where people are empowered to speak up, supporting firms to make fair, consistent decisions and deterring wrongdoing that can harm individuals and create unhealthy cultures. For firms where long hours, high-pressure environments and performance-driven cultures can create particular risks of inappropriate behaviour, proactive culture building is not merely good practice – it is a regulatory imperative.

Firms should consider regular cultural assessments using employee surveys, focus groups and exit interviews to identify potential issues before they escalate. Establishing speak-up mechanisms including accessible grievance procedures and whistleblowing channels, with demonstrable protection for those who raise concerns – including the ability for anonymous reporting – is essential.

Conclusion

The latest guidance sets out principles at a high level but does little to elaborate through detailed case studies. However, the themes underpinning the guidance show the FCA is taking a realistic and pragmatic approach to NFM. Firms must now:

• Focus on how policies work in practice, not just whether policies are in place. NFM frameworks must be effective in operation as the FCA will seek to get behind the wording of policies and assess how they translate into conduct on the ground.
• Create an expectation that policies are reviewed regularly, with dynamic risk assessment.
• Consider their policies in the context of their specific business risks, with the FCA rejecting a prescriptive tick-box approach.
• Recognise that isolated compliance failures do not inevitably mean that a compliance programme is ineffective or that procedures are inadequate or unreasonable.

For firms, the September 2026 implementation deadline provides a clear timeline for action. Firms that treat this as an opportunity to strengthen culture, not merely a compliance exercise, will be best positioned for the FCA’s supervisory focus that will inevitably follow.