Updated FCC Regulations for Non-Financial Misbehavior
FCA Extends Conduct Rules to Combat Workplace Misconduct in Non-Bank Firms
Starting September 2026, the Financial Conduct Authority (FCA) will extend its Code of Conduct Rules (COCON) to non-bank firms with Part 4A permissions, bringing approximately 37,000 additional regulated non-bank firms within scope. This move aims to address serious workplace issues like bullying, harassment, and violence in the financial sector.
The FCA's policy change follows strong industry and stakeholder support and responds to concerns about prevalent non-financial misconduct (NFM) such as sexual harassment and bullying in financial services. The new rules will make these issues explicit breaches of FCA conduct rules in covered firms.
However, entities without Part 4A permission, such as payment firms, e-money institutions, investment exchanges, and credit rating agencies, remain outside this scope, as the Senior Managers and Certification Regime (SMCR) does not apply to them.
The FCA has opened a consultation until 10 September 2025 on new Handbook guidance to assist SMCR firms in understanding and applying these conduct rules and the fitness and propriety standards (FIT). The FCA plans to finalize the guidance by the end of 2025, ahead of the rules coming into force on 1 September 2026.
The FCA has not removed the requirement for the misconduct to be "serious" under the new proposals. The misconduct must have had a significant negative effect to breach COCON. The proposed guidance clarifies that it does not expect firms to monitor employees' private lives, but firms can rely on formal findings such as criminal convictions when assessing whether wrongdoing has taken place in an employee's private life.
Managers must take reasonable steps to prevent NFM, failing which they can breach the Individual Conduct Rules (ICR) 2. Examples include failing to intervene to stop harassment, not taking complaints seriously, and not operating policies, systems, and controls to detect it.
The new rules cover unwanted conduct that violates a person's dignity, creates an intimidating, hostile, degrading, humiliating or offensive environment, or involves violent conduct. 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.
Social media activity may also be relevant to fitness and propriety. 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.
It's important to note that not all misconduct for which a firm might take disciplinary action will amount to a breach of COCON. The FCA has clarified that the new rules explicitly apply to non-banks, but NFM can amount to a breach of COCON in any firm.
Firms should reconsider their policies and procedures for addressing NFM now, determining whether any enhancements may be necessary, and scheduling updates for after any guidance is published accordingly. The new rules do not come into force until September 2026, but firms should act to put themselves in the best possible position on the implementation date.
This policy change was confirmed in the FCA’s July 2025 policy statement CP25/18 and accompanying consultations, supported by authoritative legal and industry analyses ([1], [2], [3], [4], [5]).
- The extension of the Financial Conduct Authority's (FCA) Conduct Rules (COCON) to non-bank firms, starting in September 2026, is a part of the policy-and-legislation aimed at combating workplace misconduct in the financial sector, which includes issues like bullying, harassment, and violence.
- The FCA's policy change, announced in its July 2025 policy statement CP25/18, is a response to concerns about prevalent non-financial misconduct (NFM) such as sexual harassment and bullying in financial services, and is supported by strong industry and stakeholder support.
- The new FCA rules, scheduled to come into force on 1 September 2026, will affect various business sectors, including finance, as they make issues like NFM explicit breaches of FCA conduct rules in covered firms, broadening the scope of employment law and general-news topics.
