In response to consultation feedback the Policy Statement provides the “final” guidance on non-financial misconduct (“NFM”) in financial services. The FCA’s approach includes:
- Amending their Code of Conduct (“COCON”) to explain how NFM can be a breach of the conduct rules and make it easier for firms in the Senior Managers and Certification Regime to interpret and consistently apply the FCA rules.
- Explaining how NFM forms part of the Fit and Proper test for Employees and Senior Personnel (FIT) sourcebook.
The Policy Statement confirms that NFM essentially includes bullying, harassment and violence.
According to the Policy Statement 95% of respondents including industry members, trade bodies and legal practitioners, agreed that new Handbook guidance was needed and would bring clear additional benefits.
Key changes at a glance
The FCA state that they have considered all the feedback and are proceeding with a revised version of the COCON and FIT guidance proposed in CP25/18. Key areas of change include:
- Clearer alignment with employment law.
- Clarifying that managers’ accountability is relative to their knowledge and authority.
- Withdrawing or amending examples and factors that risked imposing disproportionate burdens.
- Clarifying that firms are not expected to investigate trivial or implausible allegations or breach privacy law when assessing fitness and propriety.
- New examples and flow diagrams to help apply COCON consistently.
When does it apply?
The changes in the guidance are set out in the Non-Financial Misconduct (No 2) Instrument 2025 and come into force on 1 September 2026.
Firms hold primary responsibility
The Statement clarifies that no guidance can be exhaustive, a firm’s judgement will always be essential, but in the absence of an approach consistent with the guidance a firm will almost certainly be in breach of the COCON and being able to satisfy the Fit and Proper Person test will be exceptionally difficult. The FCA confirms that primary responsibility for preventing NFM and dealing with it when it occurs rests with firms themselves. The FCA will treat a firm’s judgement about whether misconduct is serious enough to amount to a breach as complying with the FCA rules, if the firm’s judgement is reasonable.
Why immediate action matters
The FCA confirm that the policy work on NFM is at a close and that their focus now is on how firms are tackling misconduct in practice. With the goals of raising standards, increasing accountability and building workplaces where people feel safe to speak up, the FCA is focused on creating a culture where NFM is not tolerated and transparency becomes the norm – the direction of travel is clear.
Comment
This isn’t about ticking boxes - it’s about real change. Of course, training, policies and procedures should be up-to-date, stress tested and robust. However, it will be employers who create genuinely inclusive and safe workplaces that will see the real benefits. Driving change isn’t easy. It takes an honest look at cultural challenges, strong leadership, and the courage to tackle the root causes of poor behaviour. These are issues for leaders to own and address directly, not something regulators can fix with rules alone.
With the statutory duty to prevent sexual harassment in the workplace already in force (since October 2024), further employment law changes in the pipeline, and the FCA sharpening its focus on NFM, now is the time for leaders to take bold, proactive, and preventative action.
At DWF, we can provide:
- Workplace culture audits to stress test organisational culture, identify potential behavioural risk exposure and develop risk-based remedial interventions that will actively mitigate culture risk.
- Human rights impact assessments and due diligence reviews.
- Independent reviews and/or design of ethical conduct and business integrity frameworks aligned to corporate purpose, valued behaviours and regulatory compliance requirements (including ethical decision-making and ethical business scenario analysis).
- Inclusion and diversity strategic design, development and implementation including dashboards, data and metrics, policies and procedures and global good practice.
- Tailored education programmes to embed cultural change targeting boards, executive management teams, people managers and wider employee base.
